53rd Annual Philip E.

Heckerling
Institute on Estate Planning
Heckerling 2019 Reports
January 14-18, 2019
University of Miami School of Law Center
for Continuing Legal Education

REAL
ABA
SECTION OF TRUST &
PROPERTY ESTATE LAW
Your Source for Success
Heckerling 2019

53rd Annual Philip E. Heckerling

Institute on Estate Planning
January 14-18, 2019
Heckerling 2019
University of Miami School of Law Center for Continuing Legal Education
Orlando World Center Marriott Resort and Convention Center
Orlando, Florida
http://www.law.miami.edu/heckerling

GENERAL INFORMATION ABOUT INSTITUTE:

Inquiries/Registration:
Philip E. Heckerling Institute on Estate Planning, University of Miami School of Law
Center for Continuing Legal Education
1311 Miller Dr., C-423
Coral Gables, FL 33146
Telephone: 305-284-4762 / FAX: 305-284-6752
Web site: www.law.miami.edu/heckerling E-mail: heckerling@law.miami.edu

Headquarters Hotel - Orlando World Center Marriott

8701 World Center Drive
Orlando, FL 32821
Telephone (407) 239-4200, FAX (407) 238-8777

NOTICE: Although audio tapes of all of the substantive session at the Miami Institute currently are only
made available to Institute registrants for purchase, the entire proceeding of the Institute, other than the
afternoon special sessions, are published annually by Lexis/Nexis. For further information, go to their Web
site at http://www.lexisnexis.com/productsandservices. The text of these proceedings is also available on
CD ROM from Authority On-Demand by LexisNexis Matthew Bender. For further information, contact
your sales representative, or call (800) 833-9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order Fulfillment Dept.,1275 Broadway, Albany, NY 12204

NOTICE: The content herein is to be used for information purposes only. Neither the Heckerling Institute
nor the University of Miami represent or warrant the accuracy or completeness of the information
contained in these Reports, and do not endorse the content. Moreover, the views expressed herein do not
necessarily reflect the views of the Heckerling Institute or the University of Miami. In no event will the
Heckerling Institute or the University of Miami be liable for any damages that might result from any use of
or reliance on these Report.

This reporting service is brought to you by the ABA-PTL Discussion List Moderators. The URL for the
ABA-PTL searchable Web-based Archives is:
http://mail.americanbar.org/archives/aba-ptl.html.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
1
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Table of Contents
53rd Annual Philip E. Heckerling Institute on Estate Planning ................................... 1
Heckerling 2019 – Introduction Part 1 ........................................................................... 8
Institute Faculty ........................................................................................................ 10
Institute Advisory Committee ................................................................................... 17
EMERITUS MEMBERS .......................................................................................... 18
Heckerling 2019 – Introduction Part II ........................................................................ 23
Reporters ....................................................................................................................... 23
FUNDAMENTALS PROGRAM ................................................................................. 24
Basis After the 2017 Tax Act – Important Before, Crucial Now ............................. 24
Introductory Remarks ............................................................................................... 24
Tina Portuondo, Director, Heckerling Institute ........................................................ 24
Getting the 411 on IRC 199A: Just the Facts, Ma’am .............................................. 24
Qualified Small Business Stock: The Next Big Bang .............................................. 25
It’s All in the Family…What’s a Family? Estate Planning & Trust Management for
a Brave New World .................................................................................................. 25
Make Your Charitable Estate Plan Great Again ....................................................... 25
Decisions and Revisions Which a Minute Will Reverse – How the 2017 Tax Act
Changed the Tax Consequences of Marriage and Divorce ....................................... 25
Why Can’t My Brother-In-Law Bob Be the Executor of My Estate? Considerations
Involving the Selection of the Proper Fiduciaries..................................................... 26
Forgiveness or Permission? Frank and Practical Pointers Regarding Ruling Requests
................................................................................................................................... 26
Are You Building a House of Cards? ....................................................................... 27
Prepare for Global Wealth: Demystifying Planning for U.S. Persons with Foreign
Assets ........................................................................................................................ 27
Question and Answer Panel ...................................................................................... 27
FUNDAMENTALS PROGRAM ................................................................................. 27
Evolutionary Planning: 20 or so Ways to Increase Client Happiness and Value to
Your Practice with Planning Techniques (Non-Tax) and Strategic Practice
Techniques ................................................................................................................ 27
SPECIAL SESSIONS I................................................................................................. 28
IRC 199A: Grafting a New Branch onto the Choice-of-Entity Decision Tree ......... 28
Session I-B ................................................................................................................ 28
Structuring the Tax Consequences of Marriage and Divorce After the 2017 Tax Act
................................................................................................................................... 28
Session I-C ................................................................................................................ 28
Preparing for the Unexpected: Designing and Drafting Estate Plans That Can
Withstand the Heat! .................................................................................................. 28
Session I-D ................................................................................................................ 29
What Do You Mean I Cannot Take That Money? Duties, Responsibilities, and
Ethics for Fiduciaries and the Attorneys who Advise Them .................................... 29
Session I-E ................................................................................................................ 29
Negotiating and Drafting Charitable Gift Agreements to Stay Out of Court, the
News, and the Attorney General's Office ................................................................. 29
Session I-F ................................................................................................................ 29

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
2
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Fundamentals Program ................................................................................................. 30

It Ain’t Over Till the Post-Mortem Planning Is Done .............................................. 30
SPECIAL SESSIONS II ............................................................................................... 30
QSBS: The Quest for Quantum Exclusions (Queries, Qualms, and Qualifications) 30
Session II-B............................................................................................................... 30
Donor-Advised Funds ............................................................................................... 30
Session II-C............................................................................................................... 30
Review of the Past Year’s Significant, Curious, or Downright Fascinating Fiduciary
Cases (at least it seems to me) .................................................................................. 30
Session II-E ............................................................................................................... 31
Protecting Client Data: Ethics, Security, and Practicality for Estate Planners ......... 31
Session II-F ............................................................................................................... 31
Welcome to the Jungle: Re-Defining Family Amid Advances in Reproductive
Science ...................................................................................................................... 31
Almost All You Need to Know About Powers of Appointment to Make You a Super
Estate Planner............................................................................................................ 31
The War on Money Laundering: Making Lawyers and Accountants Part of Law
Enforcement .............................................................................................................. 32
Don’t Dis the Disclaimer: Know the Rules to Keep Up with a Changing Game ..... 32
Cutting the Gordian Knot of Insurance Transactions ............................................... 32
FUNDAMENTALS PROGRAM ................................................................................. 32
The Life Cycle of a Donor's Charity ......................................................................... 33
SPECIAL SESSIONS III .............................................................................................. 33
Session III-A ............................................................................................................. 33
More of What You Need to Know About Powers of Appointment ......................... 33
Session III-B ................................................................................................................. 33
A View from the Trenches: What’s Happening with Transfer Tax Audits/
Controversies in the Era of Higher Exemptions ....................................................... 33
Session III-C ............................................................................................................. 34
Unwinding an Unworkable Transaction with a Workable Policy ............................ 34
Session III-D ............................................................................................................. 34
Understanding the Practical and Ethical Implications of the FATF
Recommendations as Applied to Lawyers and Accountants; Lessons from the U.K.
Experience................................................................................................................. 34
Session III-E.............................................................................................................. 34
Greasing the Squeaky Wheel: Methods for Managing Difficult Beneficiaries ........ 34
Session III-F .............................................................................................................. 34
Essentials of Family Offices for the Estate Planner – A Primer on Functions,
Structures, and Related Issues................................................................................... 34
SPECIAL SESSIONS IV.............................................................................................. 35
Session IV-A ............................................................................................................. 35
IRA Thy Name Is SNAFU........................................................................................ 35
Session IV-B ................................................................................................................. 35
Having Your Cake and Eating It Too ....................................................................... 35
Session IV-C ............................................................................................................. 35
What’s Hot in Florida? Recent Developments in Florida Law................................. 35

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
3
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Session IV-D ............................................................................................................. 36

Playing the Disclaim Game: Accessing Optionality in Planning and Problem-
Solving ...................................................................................................................... 36
Session IV-E ............................................................................................................. 36
International Update: Relevant Legal Developments from Outside the United States
................................................................................................................................... 36
Life Before and After Death with the Minimum Distribution Trust Rules .............. 36
Living in a Statistical Universe: Embracing the Art and Ethics of the Engagement
Letter ......................................................................................................................... 36
We Saw. We Heard. We Read. We Learned. ........................................................... 37
Heckerling 2019 – Report #1 .......................................................................................... 38
Basis After the 2017 Tax Act........................................................................................ 38
1. Introduction to a few Basis Rules. ........................................................................ 38
2. Portability Planning. ............................................................................................. 39
3. Basis Planning with Credit Shelter Trusts. ........................................................... 40
4. Up-Stream Planning. ............................................................................................. 41
5. Inclusion with Sections 2036 and 2038. ............................................................... 42
6. Planning with Other Types of Trusts. ................................................................... 42
7. Opt-In Community Property Trusts. ..................................................................... 43
Conclusion. ............................................................................................................... 44
Recent Developments 2018 .......................................................................................... 44
2017 Tax Cuts and Jobs Act (TCJA) ........................................................................ 45
Qualified opportunity zones (QOZ): ......................................................................... 46
Other 2018 Recent Developments ............................................................................ 47
Heckerling 2019 – Report #2 .......................................................................................... 51
General Session 1.......................................................................................................... 51
Getting The 411 On IRC 199A: Just the Facts Ma’am............................................. 51
General Session 2:......................................................................................................... 54
Qualified Small Business Stock: The Next Big Bang .............................................. 54
General Session 3:......................................................................................................... 57
Estate planning and trust management for the brave new world: it’s all in the
family…what’s a family? ......................................................................................... 57
General Session 4:......................................................................................................... 60
Make Your Charitable Estate Plan Great Again - Charitable Planning with
Retirement Accounts: Strategies, Traps and Solutions ............................................. 60
Heckerling 2019 – Report #3 .......................................................................................... 63
Heckerling Specials from Vendors: .............................................................................. 63
General Session 5.......................................................................................................... 63
Marriage and Divorce – After the 2017 Tax Act ...................................................... 63
General Session 6:......................................................................................................... 66
Why can’t my Brother-In-Law Bob be the Executor of my Estate? Considerations
Involving the Selection of the Proper Fiduciaries..................................................... 66
General Session 7:......................................................................................................... 68
Forgiveness or Permission? Frank and Practical Pointers Regarding Ruling Requests
................................................................................................................................... 68
General Session 8:......................................................................................................... 71

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
4
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Sweet Child O’Mine: Planning for Parents of Minors.............................................. 71

Heckerling 2019 – Report #4 .......................................................................................... 76
General Session 9.......................................................................................................... 76
Are You Building a House of Cards? ....................................................................... 76
General Session 10:....................................................................................................... 79
Demystifying Planning for U.S. Persons with Foreign Assets ................................. 79
General Session 11:....................................................................................................... 83
Question and Answer Panel ...................................................................................... 83
Heckerling 2019 – Report #5 .......................................................................................... 89
SPECIAL SESSION I-A............................................................................................... 89
IRC 199A: GRAFTING A NEW BRANCH ONTO THE CHOICE-OF-ENTITY
DECISION TREE ..................................................................................................... 89
SPECIAL SESSION I-B ............................................................................................... 91
TAX CONSEQUENCES OF MARRIAGE AND DIVORCE AFTER THE 2017
TAX ACT ................................................................................................................. 91
SPECIAL SESSION I-C ............................................................................................... 94
PREPARING FOR THE UNEXPECTED: DESIGNING AND DRAFTING
ESTATE PLANS THAT CAN WITHSTAND THE HEAT! .................................. 94
SPECIAL SESSION I-D............................................................................................... 96
What Do You Mean I Cannot Take That Money? Duties, Responsibilities, and
Ethics for Fiduciaries and the Attorneys who Advise Them .................................... 96
Heckerling 2019 – Report 6 .......................................................................................... 101
FUNDAMENTALS 2 ................................................................................................. 101
Evolutionary planning: 20 or so ways to increase client happiness and value to your
practice with planning and strategic practice techniques ........................................ 101
SPECIAL SESSION I-E ............................................................................................. 105
Negotiating and Drafting Charitable Gift Agreements to Stay Out of Court, the
News, and the Attorney General's Office ............................................................... 105
SPECIAL SESSION I-F: ............................................................................................ 112
New Kids on the Block(chain): Planning with Bitcoin and Cryptocurrency.......... 113
SPECIAL SESSION II-B ........................................................................................... 116
I. INTRODUCTION TO DONOR-ADVISED FUNDS ........................................ 116
II. PERMISSIBLE GRANTS ................................................................................. 117
III. NOTICE 2017-73.............................................................................................. 117
Heckerling 2019 – Report #7 ........................................................................................ 120
FUNDAMENTALS PROGRAM 3 ............................................................................ 120
It Ain’t Over Till the Post-Mortem Planning Is Done ............................................ 120
SPECIAL SESSION II-A ........................................................................................... 124
QSBS: The Quest for Quantum Exclusions (Queries, Qualms, and Qualifications):
................................................................................................................................. 124
Session II-B – See Notes............................................................................................. 126
SPECIAL SESSION II-C ........................................................................................... 127
Review of the Past Year’s Significant, Curious, or Downright Fascinating Fiduciary
Cases (at least it seems to me) ................................................................................ 127
SPECIAL SESSION 2-D ............................................................................................ 132
Lose the Fear of the Foreign - Practical Planning Strategies for Foreign Assets ... 132

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
5
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

SPECIAL SESSION II-E............................................................................................ 134

Protecting Client Data: Ethics, Security, and Practicality for Estate Planners ....... 134
SPECIAL SESSION II-F ............................................................................................ 138
Welcome to the Jungle: Re-Defining Family Amid Advances in Reproductive
Science .................................................................................................................... 138
Heckerling 2019 – Report #8 ........................................................................................ 143
GENERAL SESSION 12............................................................................................ 143
Powers Of Appointment: Almost All You Need To Know About Powers Of
Appointment To Make You A Super Estate Planner .............................................. 143
GENERAL SESSION 13............................................................................................ 145
The War on Money Laundering: Making Lawyers and Accountants Part of Law
Enforcement ............................................................................................................ 145
GENERAL SESSION 14............................................................................................ 147
Don’t Dis the Disclaimer: Know the Rules to Keep Up with a Changing Game ... 147
GENERAL SESSION 15............................................................................................ 150
Cutting the Gordian Knot of Insurance Transactions ............................................. 150
Heckerling 2019 – Report #9 ........................................................................................ 155
SPECIAL SESSION III-A .......................................................................................... 155
More of What you need to Know About Powers of Appointment ......................... 155
Special Session III-B................................................................................................... 158
A View from the Trenches: What’s Happening with Transfer Tax
Audits/Controversies in the Era of Higher Exemptions? ........................................ 158
SPECIAL SESSION III-C .......................................................................................... 161
Unwinding An Unworkable Transaction With A Workable Policy ....................... 161
SPECIAL SESSION III-D .......................................................................................... 163
Understanding the Practical and Ethical Implications of the FATF
Recommendations as Applied to Lawyers and Accountants; Lessons from the U.K.
Experience............................................................................................................... 163
Heckerling 2019 – Report #10 ...................................................................................... 168
FUNDAMENTALS SESSION #4 .............................................................................. 168
The Life Cycle of a Donor’s Charity ...................................................................... 168
SPECIAL SESSION III-E .......................................................................................... 172
Greasing the Squeaky Wheel: Methods for Managing Difficult Beneficiaries ...... 172
SPECIAL SESSION III – F ........................................................................................ 176
Essentials of Family Offices for the Estate Planner – A Primer on Functions,
Structures, and Related Issues................................................................................. 176
Heckerling 2019 – Report #11 ...................................................................................... 181
Special Session IV – A ............................................................................................... 181
IRA, thy name is SNAFU ....................................................................................... 181
SPECIAL SESSION IV-B .......................................................................................... 184
Having Your Cake and Eating It Too ..................................................................... 184
Special Session IV-C .................................................................................................. 187
What’s Hot in Florida? Recent Developments in Florida Law.............................. 187
Heckerling 2019 – Report #12 ...................................................................................... 192
SPECIAL SESSION IV-D.......................................................................................... 192

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
6
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Playing the Disclaim Game (Accessing Optionality in Planning and Problem-

Solving) ................................................................................................................... 192
Special Session 4-E ..................................................................................................... 195
International Update: Relevant Legal Developments from Outside the United States
................................................................................................................................. 195
Heckerling 2019 – Report #13 ...................................................................................... 199
GENERAL SESSION 15............................................................................................ 199
Life Before And After Death With The Minimum Distribution Trust Rules ......... 199
GENERAL SESSION 16............................................................................................ 201
Living in a Statistical Universe: Embracing the Art and Ethics of the Engagement
Letter ....................................................................................................................... 201
Heckerling 2019 – Report #14 - Vendors .................................................................... 209

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
7
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Introduction Part 1

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
listing of the proceedings will also be published as part of Introduction Part 2 that will
be distributed soon. This Introduction Part 1 covers the Institute Opening Reception, its
Scope, the Faculty, the Advisory Committee, the Sponsors and the Vendors, plus general
information at the end about the Institute.

We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website, as we have since the 2000 Institute. The Reports from 2000
to 2018 can now be found at URL
http://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling.htm
l. In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located at URL http://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who will be present in Orlando in 2019 are Joanne Hindel,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; Craig Dreyer, Esq., an
attorney with the Dreyer Law Firm in Stuart, Florida; Kristin Dittus, Esq., a solo
attorney with offices in Denver, Colorado, Michael Sneeringer, Esq., an attorney with
Porter, Wright, Morris and Arthur, LLP in Naples, Florida, Michelle R. Mieras,
Esq.,Chief Fiduciary Officer, SVP, with ANB Bank in Denver, Colorado, Beth
Anderson, Esq., an att orney with Wyatt, Trrant & Combs, LLP in Louisville, Kentucky;
Patrick J, Duffey, Esq, an attorney with Holland & Knight in Tampa, Florida; Scott M.
Hancock, Esq., an attorney with Winstead PC; Edwin P. Morrow III, Esq., . Eastern
U.S. Wealth Strategist for U.S. Bank Private Wealth Management in Cincinnati, Ohio;
and David J. Slenn, Esq., an attorney with Shoemaker, Loop & Kendrick, LLP, in
Tampa, Florida.

The Report Editors in 2019 will be Bruce A. Tannahill Esq., a Director of Estate and
Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will be
ably assisted in those duties this year by Reporter Michelle R. Mieras. Esq.

Institute's Welcome Reception - Monday Evening, January 14th

The Heckerling Institute staff reminds everyone to attend the Complementary Welcome
Reception for Registrants that will be held in the exhibition hall at the Marriott from 6:00
to 7:00 p.m. on Monday evening, January 14th. This is a don't miss function, especially
for first time attendees - plenty of food and lots to drink, all compliments of the
Institute. Be on the look out for your friendly ABA-PTL Reporters who will all have
badges on identifying them as such and say hello to them.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
8
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The Purposes and Scope of the 2019 Institute

The Heckerling Institute on Estate Planning is the leading educational conference for all
members of the estate planning team, including attorneys, trust officers, accountants,
charitable giving professionals, insurance advisors, elder law specialists, wealth
management professionals, educators and nonprofit advisors. In addition to providing the
highest quality educational programming, the Institute offers unparalleled networking and
professional development opportunities and the nation’s largest exhibit hall dedicated to
the estate planning industry.

The 53rd Institute offers practical guidance on today’s most important tax and non-tax
planning issues, including the planning challenges and opportunities presented by
the 2017 Tax Act. It will also offer valuable insights and innovative ideas for planning
effectively in what remains an uncertain and unpredictable political and economic
environment. Attendees can benefit from programs covering a wide range of advanced
level planning topics, or can customize their educational experience with one of our
specialized program tracks to expand their expertise in today’s fastest growing practice
areas. Finally, our outstanding faculty includes many of your favorite Institute speakers,
as well as a number of new faces providing a fresh look at key issues in individual and
estate planning.

Some of the highlights of this year's program include:

Focus Series: This series of programs covers the impact of the 2017 Tax Act on estate
planning, including the increased importance of basis planning, new IRC Section 199A
and the qualified business income deduction, planning with Qualified Small Business
Stock, changes to the tax treatment of marriage and divorce, the effective use of powers of
appointment and disclaimers, and planning with the increased exemptions.

NEW! Planning for Today’s Families: This series provides insights on the issues facing
today’s redefined and evolving families. Topics include the estate planning implications of
changing family structures, planning for minors and their parents, the impact of assisted
reproductive technology, and managing beneficiaries with mental health or substance
abuse challenges, autism, and other executive functioning disorders.

International Planning: Recognizing the increasing prevalence of clients with

international connections, this series provides an in-depth look at planning for U.S.
persons who own, or intend to acquire, foreign assets, as well as an overview of the most
important planning developments from outside the U.S.

Planning with Trusts: This series covers planning with powers of appointment, planning
and drafting in anticipation of incapacity, fiduciary selection (including ethical issues),
recent fiduciary cases, and using trusts to plan for the increased exemptions.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
9
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Charitable Giving: This track of programs offers new ideas for tax effective charitable
giving, guidance on negotiating and drafting successful charitable gift agreements, a
comprehensive examination of donor-advised funds, and advice on planning for the
various stages in the life cycle of a charity.

Financial Assets: These programs explore planning with blockchain, bitcoin and
cryptocurrency, unwinding life insurance transactions, planning with retirement benefits,
and the essentials of family offices.

Ethics: This series addresses today’s emerging ethical issues, including a look at ethics
and technology that will provide practical guidance on the tools available to protect client
security. It will also examine best practices for drafting engagement letters, and review
worldwide trends regarding the obligation of attorneys and accountants to avoid assisting
with money laundering.

Litigation and Tax Procedure: These programs cover recent cases involving fiduciaries,
the status of transfer tax audits and controversies in the era of higher exemptions, and the
practical and procedural considerations regarding IRS ruling requests.

Fundamentals: The fundamentals programs provide an in-depth look at managing tax

basis, tips on improving both your practice and your clients’ satisfaction, an overview of
post-mortem planning, and a review of how to successfully create and operate a charity.

Institute Faculty
Steve R. Akers
Bessemer Trust
Dallas, Texas

N. Todd Angkatavanich
Withers Bergman LLP
Greenwich, Connecticut

Mark Barmes
Lenz & Staehelin
Geneva, Switzerland

Carole M. Bass
Moses & Singer LLP
New York, New York

Stuart C. Bear
Chestnut Cambronne PA
Minneapolis, Minnesota

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
10
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Edward J. Beckwith
Baker & Hostetler, LLP
Washington, D.C

Turney P. Berry
Wyatt, Tarrant & Combs, LLP
Louisville, Kentucky

Jonathan G. Blattmachr
Pioneer Wealth Partners, LLC
New York, New York

Jocelyn Margolin Borowsky

Duane Morris LLP
Wilmington, Delaware

Austin Bramwell
Milbank, Tweed, Hadley & McCloy LLP
New York, New York

Lawrence Brody
Bryan Cave Leighton Paisner
St. Louis, Missouri

Elaine M. Bucher
Gunster
West Palm Beach, Florida

Ann B. Burns
Gray Plant Mooty
Minneapolis, Minnesota

Sarah S. Butters
Ausley McMullen
Tallahassee, Florida

Natalie B. Choate
Nutter McClennen & Fish
Boston, Massachusetts

Dora Clarke
Withers Worldwide
London, England

Joseph Comeau
Andersen Tax LLC

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
11
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Boston, Massachusetts

J. Michael Deege
Wilson Deege Despotovich Riemenschneider & Rittgers
West Des Moines, Iowa

Samuel A. Donaldson
Georgia State University College of Law
Atlanta, Georgia

Abigail Rosen Earthman

Winstead PC
Dallas, Texas

Dana G. Fitzsimons, Jr.

Bessemer Trust
Atlanta, Georgia

Christine Graham
UMB Bank
Kansas City, Missouri

Michelle Graham
Withers Bergman LLP
San Diego, California

Martin Hall
Ropes & Gray LLP
Boston, Massachusetts

Carol A. Harrington
McDermott Will & Emery LLP
Chicago, Illinois

Louis S. Harrison
Harrison & Held, LLP
Chicago, Illinois

Elizabeth C. Henry
Chestnut Cambronne PA
Minneapolis, Minnesota

Miriam Wogan Henry

Jones Walker LLP
New Orleans, Louisiana

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
12
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Christopher R. Hoyt
University of Missouri (Kansas City)
School of Law
Kansas City, Missouri

Nancy C. Hughes
Hughes & Scalise, P.C.
Birmingham, Alabama

Benetta P. Jenson
J.P. Morgan Private Bank
Chicago, Illinois

Sarah Moore Johnson

Birchstone Moore LLC
Washington, D.C.

William J. Kambas
Withers Bergman LLP
Greenwich, Connecticut

Kim Kamin
Gresham Partners, LLC
Chicago, Illinois

Amy K. Kanyuk
McDonald & Kanyuk, PLLC
Concord, New Hampshire

Shane Kelley
The Kelley Law Firm, P.L.
Fort Lauderdale, Florida

Robert K. Kirkland
Kirkland Woods & Martisen
Liberty, Missouri

Cara M. Koss
Arnold & Porter
Washington, D.C.

Bernard A. Krooks
Littman Krooks LLP
New York, New York

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
13
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Julie Miraglia Kwon

McDermott Will & Emery LLP
Menlo Park, California

James D. Lamm
Gray Plant Mooty
Minneapolis, Minnesota

Lester B. Law
Franklin Karibjanian & Law
Naples, Florida

Paul S. Lee
Northern Trust
New York, New York

Margaret G. Lodise
Sacks, Glazier, Franklin & Lodise
Los Angeles, CA

Syida C. Long
Goldman Sachs & Co.
San Francisco, California

Ruth M. Madrigal
Steptoe & Johnson LLP
Washington, D.C.

R. Hugh Magill
Northern Trust
Chicago, Illinois

Mary Ann Mancini

Loeb & Loeb LLP
Washington, D.C.

Carlyn S. McCaffrey
McDermott Will & Emery LLP
New York, New York

Daniel H. McCarthy
Wick Phillips
Fort Worth, Texas

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
14
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Michele A.W. McKinnon

McGuireWoods LLP
Richmond, Virginia

Eliam Medina
Willing.com (Bequest, Inc.)
Miami, Florida

Barry A. Nelson
Nelson & Nelson, P.A.
North Miami Beach, Florida

Arden O'Connor
O'Connor Professional Group
Boston, Massachusetts

John W. Porter
Baker Botts, L.L.P.
Houston, Texas

John W. Prokey
Ramsbacher Prokey Leonard
San Jose, California

Mary F. Radford
Georgia State University College of Law
Atlanta, Georgia

Linda J. Ravdin
Pasternak & Fidis, P.C.
Bethesda, Maryland

Craig C. Reaves
Reaves Law Firm, PC
Kansas City, Missouri

Charles A. "Clary" Redd

Stinson Leonard Street LLP
St. Louis, Missouri

John Riches
RMW Law LLP
London, England

John T. Rogers, Jr.

Rogers Trust Law

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
15
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Los Angeles, California

Francis J. Rondoni
Chestnut Cambronne PA
Minneapolis, Minnesota

Michael Rosen-Prinz
McDermott Will & Emery LLP
Los Angeles, California

Alan F. Rothschild, Jr.

Page, Scrantom, Sprouse, Tucker & Ford, P.C.
Columbus, Georgia
Gideon Rothschild
Moses & Singer LLP
New York, New York

Daniel S. Rubin
Moses & Singer LLP
New York, New York

Scott L. Rubin
Fogel & Rubin
Miami, Florida

Dina Kapur Sanna

Day Pitney LLP
New York, New York

Donna J. Snyder
University of Michigan
Ann Arbor, Michigan

Todd I. Steinberg
Loeb & Loeb LLP
Washington, D.C.

Robert A. "Bobby" Stover, Jr.

Ernst & Young
Dallas, Texas

Akane R. Suzuki
Garvey Schubert Barer, P.C.
Seattle, Washington

John A. Terrill, II

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
16
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckscher, Teillon, Terrill & Sager, P.C.

West Conshohocken, Pennsylvania

Margaret Van Houten

Davis Brown Law Firm
Des Moines, Iowa

Suzanne Brown Walsh

Murtha Cullina LLP
Hartford, Connecticut

Carolyn O. "Morey" Ward

Ropes & Gray LLP
Washington, D.C.

Melissa J. Wilms
Davis & Willms, PLLC
Houston, Texas

Lauren J. Wolven
Levenfeld Pearlstein, LLC
Chicago, Illinois

Howard M. Zaritsky
Esquire
Rapidan, Virginia

Institute Advisory Committee

Tina Portuondo, Chair

University of Miami School of Law
Coral Gables, Florida

Steve R. Akers, Bessemer Trust, Dallas, Texas

Ronald D. Aucutt, McGuireWoods LLP, Tysons, Virginia
Norman J. Benford Greenberg Traurig, P.A., Miami, Florida
Turney P. Berry, Wyatt, Tarrant & Combs LLP, Louisville, Kentucky
Samuel A. Donaldson, Georgia State University College of Law, Atlanta, Georgia
S. Stacy Eastland, Goldman, Sachs & Co., Houston, Texas
Charles D.“Skip” Fox, IV, McGuireWoods LLP, Charlottesville, Virginia
Carol A. Harrington, McDermott Will & Emery LLP, Chicago, Illinois
Ellen K. Harrison, McDermott Will & Emery LLP, Washington, D.C.
Donald O. Jansen, University of Texas System, Houston, Texas

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
17
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Bernard A, Krooks, Littman Krooks LLP, New York, New York

Paul S. Lee, Northern Trust, New York, New York
Stephanie Loomis-Price, Winstead P.C., Houston, Texas
Mary Ann Mancini, Loeb & Loeb LLP, Washington, D.C.
Carlyn S. McCaffrey, McDermott, Will & Emery LLP, New York, New York
Jerry J. McCoy, Law Firm of Jerry J. McCoy, Washington, D.C.
Louis A. Mezzullo, Withers Bergman LLP, Rancho Santa Fe, California
Malcom A. Moore, Davis Wright Tremaine LLP, Seattle, Washington
M. Read Moore, McDermott Will & Emery, LLP Menlo Park, California
Richard W. Nenno, Wilmington Trust Company, Wilmington, Delaware
John W. Porter, Baker Botts, LLP, Houston, Texas
Susan Porter, Fiduciary Consultant, New York, New York
Bruce S. Ross, Holland & Knight LLP, Los Angeles, California
Alan F. Rothschild, Jr., Page, Scrantom, Sprouse, Tucker & Ford, P.C., Columbus,
Georgia
Gideon Rothschild, Moses & Singer LLP, New York, New York
Pam H. Schneider, Gadsden Schneider & Woodward LLP, Radnor, Pennsylvania
Robert H. Sitkoff, Harvard Law School, Cambridge, Massachusetts
Bruce M. Stone, Goldman, Felcoski & Stone, P.A., Coral Gables, Florida
Patricia D. White, University of Miami School of Law Coral Gables, Florida
Howard M. Zaritsky, Esquire, Rapidan, Virginia

EMERITUS MEMBERS

Byrle M. Abbin, McLean, Virginia

Mark L. Ascher, University of Texas School of Law, Austin, Texas
Alan D. Bonapart, Bancroft & McAlister LLP, Mill Valley, California
Lawrence Brody, Bryan Cave Leighton Paisner, St. Louis, Missouri
J. Donald Cairns, Schneider Smeltz Spieth Bell LLP, Cleveland, Ohio
Dave L. Cornfeld, St. Louis, Missouri
Joseph G. Gorman, Jr., Sheppard Mullin, Los Angeles, California
Max Gutierrez, Jr., San Francisco, California
Marcia Chadwick Holt, Davis,Graham & Stubbs LLP, Denver, Colorado
Judith W. McCue, Chicago, Illinois
Jeffrey N. Pennell, Emory University School of Law, Atlanta, Georgia
John R. Price, Seattle, Washington

Exhibitors and Sponsors and Location(s) in Exhibit Hall

ABA - Section of Real Property,Trust and Estate Law............................. 227

ALIRT Insurance Research .......... …………………………………….....130
Alliance Trust Company of Nevada...........................................................317
American Cancer Society Charitable Estate Planning Services ................213
American Heart Association Charitable Estate Planning...........................430
American Society of Appraisers.................................................................232

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
18
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Appraisers & Planners, Inc Gold Sponsor.................................................218

Ashar Group LLC Platinum Sponsor........................................................I-2
ASCPA……………....................................................................................333
Asset Life Settlements.................................................................................331
Baker Tilly Gold Sponsor ………………………………………………..509
BDO USA Platinum Sponsor………………..............................................E-1
Bloomberg Tax Diamond Sponsor………...................................................C
BNY Mellon Wealth Management Gold Sponsor........................................220
Bonhams Auctioneers & Appraisers......................................................407, 409
Brentmark Software, Inc. ..............................................................................408
Bridgeford Trust Company Silver Sponsor..................................................400
The Bryn Mawr Trust Company of Delaware...............................................108
CAF America: Global Donor Advised Funds Platinum Sponsor..............,,D-2
Cancer Research Institute Platinum Sponsor……………………...………307
CFP Board.......................................................................................................302
Charles Schwab & Co., Inc. Platinum Sponsor............................................120
Christiana Trust | WSFS Wealth....................................................................429
Christie’s.........................................................................................................419
Chubb Personal Risk Services.........................................................................223
CIBC Atlantic Trust Private Wealth Management..........................................601
City National Rochdale....................................................................................233
Collector Systems, LLC……………………………………………………...234
Comerica Bank & Trust, N.A. Silver Sponsor................................................312
Commonwealth Trust Company.......................................................................533
Coral Gables Trust............................................................................................228
Corporate Valuation Services, Inc....................................................................334
Cowan’s Auctions.............................................................................................303
Cumberland Trust..............................................................................................433
Deloitte Platinum Sponsor...............................................................................J-2
Deutsche Bank Wealth Management.........................................................412, 414
Directive Communication Systems, Inc…........................................................204
Donlevy-Rosen & Rosen, P.A...........................................................................231
DOYLE..............................................................................................................425
EisnerAmper LLP Gold Sponsor……………..................................................320
Empire Valuation Consultants Silver Sponsor.........................................316, 318
ESI-APPRAISE..................................................................................................501
Estate Valuations & Pricing Systems, Inc……………......................................328
EstateWorks........................................................................................................416
EY Platinum Sponsor……………………………...........................................G-2
FairSplit.com......................................................................................................503
Fidelity Charitable Silver Sponsor....................................................................420
Fiduciary Trust Company International .............................................................417
Fiduciary Trust of New England Gold Sponsor ..…………………………….200
FileCenter....................................................................................................207, 209
Foundation Source Platinum Sponsor……………...........................................J-1
Gillett Publishing LLC.........................................................................................322

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
19
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Gurr Johns, Inc.....................................................................................................324

HeirSearch.com....................................................................................................216
Henley & Partners.................................................................................................432
Heritage Auctions.................................................................................................521
IKOR International................................................................................................435
InterActive Legal Platinum Sponsor………………...........................................436
ITM TwentyFirst...................................................................................................126
The Lackner Group, Inc.................................................................................110, 112
Lawgic, LLC..........................................................................................................424
Leslie Hindman Auctioneers..................................................................................329
LexisNexis Platinum Sponsor………………………..........................................G-1
Lion Street Gold Sponsor......................................................................................218
Mewbourne Oil Company Gold Sponsor………………………………………..301
Miller Thomson LLP .............................................................................................304
MPI.................................................................................................................313, 315
National Christian Foundation................................................................................332
National Philanthropic Trust...........................................................................413, 415
National Underwriter...............................................................................................404
New Hampshire Trust Council……………………………………………………202
Next Generation Trust Company…………….........................................................517
Nixon Peabody Fiduciary Services..........................................................................211
Northern Trust Platinum Sponsor..........................................................................321
OC Consulting Group..............................................................................................230
Parasec.....................................................................................................................325
Parkinson’s Foundation Gold Sponsor…………..………….................................237
Peak Trust Company Platinum Sponsor................................................................D-1
Phillips Gold Sponsor.............................................................................................519
PNC Wealth Management Platinum Sponsor........................................................B-2
Practice42………………………………………………………………………….314
Prager Metis CPAs, LLC Platinum Sponsor…………..........................................116
Premier Trust............................................................................................................335
The Presser Law Firm, P.A……………………………………..............................402
Proformex………………………………………………………………………….225
ProSoft Legal………………………………………………………………………215
PwC Family Enterprises Platinum Sponsor…………............................................136
Rago Arts & Auction Center.....................................................................................212
Raymond James Trust N.A Gold Sponsor………...................................................418
RBC Trust Company (Delaware) Limited.................................................................507
REAL Automation Solutions……………………………………………………….431
The Real Real.............................................................................................................605
Reliance Trust Company of Delaware………..…………………………………….128
RenPSG Platinum Sponsor…….…………………….…………………………….600
Right at Home............................................................................................................208
SEI Archway………………………………………………………………………..435
Shriners Hospitals for Children Platinum Sponsor……...........................................B-1
Skinner, Inc.................................................................................................................222

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
20
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Sotheby’s....................................................................................................................219
South Dakota Trust Company, LLC Diamond Sponsor............................................H
Southpac.......................................................................................................................229
St. Jude Children’s Research Hospital Diamond Sponsor.........................................F
STEP USA...................................................................................................................405
Sterling Foundation Management Platinum Sponsor.................................................I-1
Sterling Trustees Silver Sponsor.................................................................................221
SunTrust Private Wealth Management Platinum Sponsor.........................................421
TaxBird byware2now....................................................................................................235
TD Wealth.....................................................................................................................406
TEAM Risk Management Strategies……………….....................................................134
TEdec Systems, Inc........................................................................................................529
The Freedom Practice Gold Sponsor…………………………………………………136
Thomson Reuters..........................................................................................100, 102, 201,
203
Tiedemann Trust
Company...................................................................................................124
Tocqueville Asset
Management............................................................................................428
Trusts & Estates / WealthManagement.com.................................................................513,
515
U.S. Bank Private Wealth
Management…………………………………………………..330
U.S. Trust Diamond
Sponsor………………………………..............................................A
UBS Financial Services Inc. Platinum
Sponsor…………………………………………..604
USArt Co.,
Inc……………………………….......................................................................206
Valbridge Property Advisors Gold
Sponsor........................................................................236
Valuation Services, Inc. Gold Sponsor
…………………...................................................437
Vanguard Charitable Silver
Sponsor....................................................................................222
Vcorp Services,
LLC……………………………………………………………………….106
Veralytic.................................................................................................................................
305
Web.com Gold
Sponsor…………………………………....................................................224
Welcome Funds,
Inc...............................................................................................................132
Wells Fargo Private Bank Platinum
Sponsor……………………………............................306
Willamette Management Associates

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
21
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

......................................................................................214
Wilmington Trust Gold
Sponsor............................................................................................336
Winged Keel
Group.................................................................................................................217
Winston Art
Group..................................................................................................................114
Wintrust Life Finance
………………………………………………………………………..401
WithumSmith+Brown Gold Sponsor
………………………………………………………300
Wolters Kluwer
……………………………………………….......................................523, 525
Yourefolio Gold
Sponsor……………………………………………………………………337

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
22
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Introduction Part II

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisor . Introduction Part I, distributed on January 8, 2019,
covered the Institute Opening Reception, its Scope, the Faculty, the Advisory Committee,
the Sponsors and the Vendors, plus general information at the end about the Institute.
This Introduction Part II provides the Institute schedule and descriptions for each of the
Fundamental, General, and Special Session.

We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/ as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found at
https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/. I
n addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located at http://mail.americanbar.org/archives/aba-ptl.html.

Reporters
Our on-site local Reporters who will be present in Orlando in 2019 are Joanne Hindel,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; Craig Dreyer, Esq., an
attorney with the Dreyer Law Firm in Stuart, Florida; Kristin Dittus, Esq., a solo
attorney with offices in the Denver, Colorado area, Michael Sneeringer, Esq., an
attorney with Porter, Wright, Morris and Arthur, LLP in Naples, Florida, Michelle R.
Mieras, Esq., Chief Fiduciary Officer, SVP, with ANB Bank in Denver, Colorado, Beth
Anderson, Esq., an attorney with Wyatt, Tarrant & Combs, LLP in Louisville,
Kentucky; Patrick J, Duffey, Esq, an attorney with Holland & Knight in Tampa,
Florida; Scott M. Hancock, Esq., an attorney with Winstead PC; Edwin P. Morrow III,
Esq., . Eastern U.S. Wealth Strategist for U.S. Bank Private Wealth Management in
Cincinnati, Ohio; and David J. Slenn, Esq., an attorney with Shumaker, Loop &
Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be Bruce A. Tannahill Esq., a Director of Estate and
Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will be
ably assisted in those duties this year by Reporter Michelle R. Mieras. Esq.

NOTE: The Specialized Program Track Codes below are:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
23
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

[CHB] -- Closely-Held Business; [CHR] Charitable; [ELD] Elder; [FIN] Financial;

[FS] Focus Series; [INT] International;
[LIT] Litigation and [TRU] Trusts

MONDAY, JANUARY 14
7:00 Conference Check-In and On-Site Registration
9:00-12:15 FS FUNDAMENTALS PROGRAM
Basis After the 2017 Tax Act – Important Before,
Crucial Now
Lester B. Law u Howard M. Zaritsky
The 2017 Tax Act makes basis more important for most clients. This
presentation discusses how to determine basis and the use of such
techniques as gross estate includible nonmarital trusts, contingent
general powers of appointment, up-stream power of appointment
trusts, and opt-in community property trusts.

12:15-2:00 Lunch

2:00-2:10
Introductory Remarks

Tina Portuondo, Director, Heckerling Institute

Patricia D. White, Dean, University of Miami School of Law
2:10-5:15 Recent Developments 2018
Steve R. Akers, Samuel A. Donaldson, Amy K. Kanyuk
Materials by: Steve R. Akers, Turney P. Berry, Samuel A.
Donaldson, Charles D. "Skip" Fox, IV, Jeffrey N. Pennell, Charles
A. "Clary" Redd, and Howard M. Zaritsky
Edited by: Ronald D. Aucutt

6:00-7:00 Institute Welcome Reception

TUESDAY, JANUARY 15
9:00-9:50 FS
Getting the 411 on IRC 199A: Just the Facts, Ma’am
Melissa J. Willms
From time to time, a new law comes along that can dramatically
affect estate and business planning, and it puts us in a dither. The
2017 Tax Act brought us IRC Section 199A and the temporary (?)
qualified business income deduction. What does it really mean? This
presentation will break down the section and clear the fog so that
you can understand 199A and be able to explain it and its planning
implications to your clients.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
24
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

9:50- FS
10:40 Qualified Small Business Stock: The Next Big Bang
Paul S. Lee
Qualified Small Business Stock (QSBS) under Section 1202 is not
just for tech companies anymore. It’s time to reconsider QSBS
because the new tax act permanently reduces the corporate tax rate,
but the deduction for pass-through entities under Section 199A will
expire. QSBS provides an exciting array of benefits (and a
surprising alternative) for owners of new and pre-existing businesses
(large and small): (1) 100% exclusion on sale; (2) tax-free rollover
of gains; and (3) a chance to multiply the exclusion by 10 times
(maybe more).

10:40- Break
10:55
10:55- FAM
11:45 It’s All in the Family…What’s a Family? Estate
Planning & Trust Management for a Brave New
World
R. Hugh Magill
The structure of the family has changed dramatically since the
1950’s, when many of our traditional estate and financial planning
strategies were developed. This presentation will provide an
overview of changing generational attributes, marital practices and
family structures, and examine their implications for estate planning,
trust design and family collaboration and governance.

11:45- CHR
12:35 Make Your Charitable Estate Plan Great Again
Christopher R. Hoyt
What are today’s best techniques to get income tax savings from
charitable gifts? What are the strategies, traps and solutions for
using retirement assets for charitable bequests? And how can a
simple charitable bequest provide income tax savings to an estate
and its beneficiaries, rather than just estate tax savings?

12:35-2:00 Lunch

2:00-2:50 FS
Decisions and Revisions Which a Minute Will Reverse
– How the 2017 Tax Act Changed the Tax
Consequences of Marriage and Divorce
Carlyn S. McCaffrey
Changing laws and relationships add to the challenge of tax
planning. The 2017 Tax Act significantly revised the tax treatment
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
25
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

of marriage and divorce. This presentation will explain how these

changes have affected the income and transfer tax consequences of
entering and exiting a marriage including the repeal of the 76 year-
old alimony deduction. The continued viability of alimony and other
trusts in connection with divorce will also be explored.

2:50-3:40 TRU
Why Can’t My Brother-In-Law Bob Be the Executor
of My Estate? Considerations Involving the Selection
of the Proper Fiduciaries
Stuart C. Bear
Often the initial meeting with a client is dominated by concerns over
death and taxes, while less time is spent considering the selection of
a reliable and trustworthy fiduciary. Who should serve as Executor;
who should serve as Trustee for any testamentary trust; who should
serve as the Attorney-in- Fact under a Financial Power of Attorney;
and finally, who should serve as the Health Care Agent under a
Health Care Directive? This session will examine the roles and
responsibilities of fiduciaries and how to best advise clients about
their selection.

3:40-3:55 LIT
Forgiveness or Permission? Frank and Practical
Pointers Regarding Ruling Requests
Julie Miraglia Kwon
This program will discuss the following topics regarding IRS ruling
requests, including Section 9100 relief: circumstances where rulings
may (or may not) be useful, parameters for their issuance,
procedural considerations, practical aspects of preparing the request,
what to expect during review by the IRS and when a ruling may be
modified or revoked after issuance.

4:45-5:35 FAM Sweet Child O’ Mine: Planning for Parents of Minors

Sarah Moore Johnson
Planners often give short shrift to the naming of a guardian, yet it is
of utmost importance for parents. This program will revisit
guardianship provisions, stand- by guardians and medical consents;
the taxation and termination of custodial accounts; the interplay of
Section 529 plans and financial aid; trends in trust terms for minors;
and how advances in reproductive science require re-thinking our
definitions of children and descendants.

WEDNESDAY, JANUARY 16

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
26
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

9:00- 9:50 TRU

Are You Building a House of Cards?
Bernard A. Krooks
Planning and drafting in anticipation of incapacity and disability can
be like building on a shaky foundation. If the architect and
contractors are not in step, the building may collapse. The same is
true for estate planning. Drafting must be done with the planning
objectives in mind, particularly when the client or one of the
beneficiaries is, or may become, incapacitated. This session will
address how to provide flexibility in your documents to avoid
building a house of cards.

9:50-10:40 INT
Prepare for Global Wealth: Demystifying Planning for
U.S. Persons with Foreign Assets
Michelle Graham
Planning for U.S. persons with foreign assets can involve a
multitude of issues and complexities that a purely domestic estate
planning matter does not. This presentation will address what issues
to look for when planning for a U.S. person with foreign assets, how
to take title, what estate planning documents to consider, and U.S.
tax compliance matters.
10:40- Break
10:55
10:55-
12:35 Question and Answer Panel
Steve R. Akers Samuel A. Donaldson Amy K. Kanyuk, Carlyn
S. McCaffrey

12:35-2:00 Lunch

2:00-3:30 FUNDAMENTALS PROGRAM

(Runs concurrently with Special Sessions I)

Evolutionary Planning: 20 or so Ways to Increase

Client Happiness and Value to Your Practice with
Planning Techniques (Non-Tax) and Strategic Practice
Techniques
Louis S. Harrison Nancy C. Hughes
The best way to client happiness and getting your bills paid is a
straight line to perceived value by the client. The goal of this session
is to introduce 20 techniques, either specific estate planning (non-

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
27
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

tax) strategies, or empirical practice techniques, that will increase

both your happiness and the value of your work to your clients.

SPECIAL SESSIONS I
FS Session I-A

IRC 199A: Grafting a New Branch onto the Choice-of-

Entity Decision Tree
Melissa J. Willms Ann B. Burns Daniel H. McCarthy
A host of issues arise when establishing a business entity. With an
existing business, sometimes it makes sense to convert to a different
structure. The 2017 Tax Act sprouted IRC Section 199A and a new
branch of the decision tree has grown. The panel will explore how
199A fits in and what you need to grasp to know which fork to take
and whether it makes sense to make a switch.

FS
Session I-B

Structuring the Tax Consequences of Marriage and

Divorce After the 2017 Tax Act
Carlyn S. McCaffrey, Linda J. Ravdin, Scott L. Rubin
The 2017 Tax Act reduced the income tax penalty on marriage, but
marriage and divorce may still have a significant impact on the
income tax liabilities of individual taxpayers. This session will
compare the differences between the tax treatment of married and
single taxpayers and the tax factors to consider when negotiating a
prenuptial and a divorce settlement agreement. It will also focus on
the post-divorce treatment of trusts created by one spouse when the
other spouse is a beneficiary, including the possible use of trusts as
replacements for the repealed alimony deduction and as estate
planning devices.

TRU
Session I-C

Preparing for the Unexpected: Designing and Drafting

Estate Plans That Can Withstand the Heat!
Craig C. Reaves, Bernard A. Krooks, Jessica A. Uzcategui
Like an architect who designs a building to withstand unexpected
disasters, estate planners must anticipate potential changes in the
lives of settlors and beneficiaries in: (1) the planning process, or
blueprint, that incorporates the client’s goals but also considers
flexibility; (2) the drafting, or construction, of the documents; and
(3) unexpected litigation that could reduce the plan to rubble. Topics
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
28
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

will include planning for future incapacity or disability, durable

powers of attorney, trust protectors, and guardians or conservators.

ETH
TRU Session I-D

What Do You Mean I Cannot Take That Money?

Duties, Responsibilities, and Ethics for Fiduciaries and
the Attorneys who Advise Them
Stuart C. Bear, Elizabeth C. Henry, Mary F. Radford, Francis J.
Rondoni
Choosing the appropriate fiduciary is more art than science. Failing
to counsel our clients in an appropriate way may subject us to
liability and leave the estate assets vulnerable to dissipation. This
session will address how best to counsel clients, and how to address
the ethical dilemmas we might encounter. It will also address our
obligations in advising fiduciaries to avoid aiding and abetting
breaches of fiduciary duties, or worse, criminal behavior.

CHR
Session I-E

Negotiating and Drafting Charitable Gift Agreements

to Stay Out of Court, the News, and the Attorney
General's Office
Alan F. Rothschild, Jr., Donna J. Snyder, Carolyn O. “Morey”
Ward
The panel will discuss real life examples of how charitable gifts get
off track and offer practical suggestions for drafting gift agreements
that effectively address future changes in circumstances, donor
involvement, naming (and un-naming) rights, and amendments to
the agreement.

FIN
Session I-F
Benetta P. Jenson, Austin Bramwell, Abigail Rosen Earthman,
Suzanne Brown Walsh
Learn how a new disruptive technology and asset was mysteriously
created, potentially impacting the future of everything. This session
will address the basics of what blockchain, bitcoin and
cryptocurrency are, their effect on transactions, tax and non-tax
issues, and how to plan with this special type of asset for wealth
transfer planning purposes.

3;30-3:50 Break

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
29
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

3:50-5:20 Fundamentals Program

It Ain’t Over Till the Post-Mortem Planning Is Done
John T. Rogers, Jr., Robert K. Kirkland
Planning does not end at death. The post-mortem administration of
an estate or trust involves many choices, both tax- and non-tax-
related. This session will cover the spectrum of post-mortem
planning, from relatively routine decisions
(e.g. selection of fiscal year, allocation of assets to sub-trusts) to
opportunities and strategies (e.g. disclaimers, tax elections, and
retirement plan decisions). The panel will use a checklist approach,
and sample checklists will be included.

SPECIAL SESSIONS II
FS
QSBS: The Quest for Quantum Exclusions (Queries,
Qualms, and Qualifications)
Paul S. Lee, Joseph Comeau, Julie Miraglia Kwon ,Syida C.
Long
The benefits of Qualified Small Business Stock (QSBS) are
straightforward, but the qualifications and questions surrounding
planning with QSBS are far from it. The panel will discuss planning
opportunities, unanswered questions, potential pitfalls, and best
practices when dealing with QSBS shareholders and entities that
aspire to become QSBS companies.

CHR
Session II-B

Donor-Advised Funds
Christopher R. Hoyt, Ruth M. Madrigal
A comprehensive examination of donor-advised funds (DAF),
including the definition of what is (or is not) a DAF, and the rules
and sanctions that apply to donors and to charities that deal with
DAFs, including pledges and bifurcated grants.
LIT
TRU Session II-C

Review of the Past Year’s Significant, Curious, or

Downright Fascinating Fiduciary Cases (at least it
seems to me)
Dana G. Fitzsimons, Jr.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
30
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

This session will review recent cases from across the country to
assist fiduciaries and their advisors in identifying and managing
contemporary challenges.

LIT Session II-D

TRU Lose the Fear of the Foreign
Michelle Graham ,Dora Clarke, Dina Kapur Sanna
This panel will discuss practical planning considerations and
strategies for U.S. persons who own or intend to acquire assets
located outside the United States.

ETH
Session II-E

Protecting Client Data: Ethics, Security, and

Practicality for Estate Planners
James D. Lamm, J. Michael Deege, Margaret Van Houten
Estate planners create, store, send, and receive confidential client
data. The panel will discuss recent changes to ethical rules for
lawyers and the most recent ABA and state bar association guidance
on securing confidential client information. The panel will also
discuss practical tips for using technology to work efficiently,
effectively, and securely, including a review of current cybersecurity
risks and available software tools and services to protect confidential
client information.
FAM
Session II-F

Welcome to the Jungle: Re-Defining Family Amid

Advances in Reproductive Science
Sarah Moore Johnson, Carole M. Bass, Cara M. Koss
This session will discuss the impact of assisted reproductive
technology on estate planning, including treatment of stored
reproductive material as client property; inheritance rights of
children born of donated sperm, eggs or embryos; posthumous
reproduction; and changing definitions of family.

THURSDAY, JANUARY 17

9:00- 9:50 FS
TRU Almost All You Need to Know About Powers of
Appointment to Make You a Super Estate Planner
Turney P. Berry, Jonathan G. Blattmachr
This presentation will discuss the benefits and burdens of powers of
appointment including the best ways to make an effective exercise

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
31
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

and prove it is consistent with the grant of the power, and to add,
remove, or modify powers both when drafting and when confronted
with existing instruments. We will also discuss unwanted attention
that powers of appointment may attract from, for instance, creditors
and the taxing authorities.

9:50-10:40 ETH
The War on Money Laundering: Making Lawyers and
Accountants Part of Law Enforcement
John A. Terrill, II, John Riches
Lawyers and accountants around the world are subject to anti-money
laundering laws, including customer due diligence and suspicious
activity reporting, but not in the U.S. What are the trends in this area
both nationally and internationally and what can U.S. lawyers and
accountants expect in the future? What should lawyers and
accountants be doing now to make sure they are not assisting in
money laundering? What are the ethical implications? How do these
developments relate to the area of tax information exchange?
10:40- Break
10:55
10:55- FS
11:45 Don’t Dis the Disclaimer: Know the Rules to Keep Up
with a Changing Game
Miriam Wogan Henry
Disclaimers can keep options open and accomplish better results for
clients. We will do a deep dive into the ins, outs and intricacies of
using disclaimers for planning, in light of changing tax laws and
client goals.
11:45- FIN
12:35 Cutting the Gordian Knot of Insurance Transactions
Mary Ann Mancini
Unwinding a transaction that no longer works is difficult enough,
but given the unique characteristics of life insurance policies,
unwinding insurance transactions is particularly difficult. This
program will explore the tax, fiduciary and cash flow issues
involved when the insurance policy still works for the client but the
transaction itself does not.

12:35-2:00 Lunch

2:00-5:20 CHR FUNDAMENTALS PROGRAM

(Runs concurrently with Special Sessions III and IV)

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
32
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The Life Cycle of a Donor's Charity

Edward J. Beckwith, Martin Hall, Michele A.W. McKinnon
Donors and their advisors often consider creating and operating
separate charities to accomplish philanthropic goals. Is a new charity
really necessary? What form should it take? What is involved in
running a successful charity? And what should be done when the
charity fulfills its mission or encounters insurmountable obstacles?
This session will include a robust, multi-disciplinary examination of
the stages in the life of a charity, the legal issues involved, and how
and when to include other advisors to help best address issues,
challenges and opportunities.

2:00-3:30 SPECIAL SESSIONS III

FS
TRU Session III-A

More of What You Need to Know About Powers of

Appointment
Turney P. Berry, Jonathan G. Blattmachr, Carol A.
Harrington
This panel will further explore planning and drafting with powers of
appointment including the best ways to make an effective exercise
and prove it is consistent with the grant of the power, and to add,
remove, or modify powers both when drafting and when confronted
with existing instruments. We will also discuss unwanted attention
that powers of appointment may attract from, for instance, creditors
and the taxing authorities.

FS
LIT
Session III-B
A View from the Trenches: What’s Happening with
Transfer Tax Audits/ Controversies in the Era of
Higher Exemptions
John W. Porter, John W. Prokey
Despite increased exemptions, transfer tax audits and litigation are
not going away. This program, led by two experienced tax litigators,
will discuss current trends in the transfer tax controversy area at
audit level, appeals and in litigation.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
33
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

FIN
Session III-C

Unwinding an Unworkable Transaction with a

Workable Policy
Mary Ann Mancini , Lawrence Brody, Todd I. Steinberg
The panel will discuss the steps of unwinding common transactions
that have utilized life insurance policies, by addressing the unique
issues that can arise when a policy is part of the transaction. In
particular, the panel will address unwinding a split-dollar
arrangement, an insurance trust arrangement and a buy-sell
arrangement.

ETH
Session III-D

Understanding the Practical and Ethical Implications

of the FATF Recommendations as Applied to Lawyers
and Accountants; Lessons from the U.K. Experience
John A. Terrill, II, John Riches
The panel will draw lessons from obligations applicable to U.K.
professionals to guide U.S. professionals on how they can
understand their own obligations to avoid assisting clients in money
laundering. It will also consider U.S. and U.K. trends in beneficial
ownership.

FAM
Session III-E

Greasing the Squeaky Wheel: Methods for Managing

Difficult Beneficiaries
Lauren J. Wolven, Christine Graham, Arden O'Connor
This presentation will address techniques for working with
beneficiaries who face mental health or substance abuse challenges,
autism spectrum and other executive functioning disorders.

FIN
Session III-F

Essentials of Family Offices for the Estate Planner – A

Primer on Functions, Structures, and Related Issues
N. Todd Angkatavanich, Richard L. Dees, William J. Kambas,
Robert A. "Bobby" Stover, Jr.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
34
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Estate planners are increasingly interacting with family offices of

clients and are sometimes asked to provide tax and legal advice with
respect to the structure of family offices. This session will provide a
primer for estate planners on exactly what a family office is and the
different functions they can have. It will discuss different types of
family office structures and how they can evolve, choice of entity,
income and transfer tax and governance considerations. Lastly, it
will address recent developments including the Lender Management
case and structuring considerations with profits interests.

3:30-3:50 Break

3:50-5:20 SPECIAL SESSIONS IV

FIN
Session IV-A

IRA Thy Name Is SNAFU

Natalie B. Choate
Too much, too little, too late, or wrong account? The seven deadly
IRA sins your clients may commit and how you can fix six of them.

FS
TRU
Session IV-B

Having Your Cake and Eating It Too

Gideon Rothschild, Jocelyn Margolin Borowsky, Barry A.
Nelson
With higher estate exemptions available, how can our high (but not
ultra-high) net worth clients hedge their risk by gifting to trusts
while remaining assured they can access it in the future? The panel
will discuss self-settled trusts and other devices to utilize the
increased exemptions.

Session IV-C

What’s Hot in Florida? Recent Developments in

Florida Law
Shane Kelley, Elaine M. Bucher, Sarah S. Butters
The panel will examine the most significant developments in Florida
law including recent statutory changes to the Florida Trust Code and
the decanting provisions, changes to ethical rules affecting all
attorneys acting as fiduciaries in Florida, new homestead legislation,

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
35
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

important case law, and much more. It will also address proposed
and anticipated legislation that could have a significant impact on
trust and estate attorneys.

FAM
Session IV-D

Playing the Disclaim Game: Accessing Optionality in

Planning and Problem-Solving
Miriam Wogan Henry, Kim Kamin, Daniel S. Rubin
Laws change, life changes; clients are looking for planning that
adapts and for solutions to unanticipated circumstances. The
panelists will cover a variety of case studies involving tax,
charitable, and asset protection planning issues to illustrate how
disclaimers can attain client goals currently and solve problems
when fate deals an unexpected hand.

INT
Session IV-E

International Update: Relevant Legal Developments

from Outside the United States
Michael Rosen-Prinz , Mark Barmes, Akane R. Suzuki
Even if you don’t travel much, your clients and their personal data
probably do. This panel will cover recent developments in trust, tax,
and privacy law around the world.

FRIDAY, JANUARY 18
9:00-9:50 FIN
Life Before and After Death with the Minimum
Distribution Trust Rules
Natalie B. Choate
The IRS’s dreaded “minimum distribution trust rules” may be
evolving. Is it time to “think outside the conduit box”? In planning
mode, safe harbors are still recommended, but in clean-up mode
consider more creative possibilities.

9:50-10:40 ETH
Living in a Statistical Universe: Embracing the Art
and Ethics of the Engagement Letter
Lauren J. Wolven
Engagement letters are a part of life for most estate planning
attorneys, CPAs and financial advisors. Even trust and estate
professionals within financial institutions need to establish an initial
connection and rules for beneficiaries. This session will cover recent
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
36
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

case law discussing engagement letters, ethics, best practices and

tips for mastering the art of the engagement letter.

10:40-
10:50 We Saw. We Heard. We Read. We Learned.
Turney P. Berry, Charles A. "Clary" Redd
After a week, what are your takeaways for the new year? What
nuggets might you have missed? Heck, what must you remember to
prove to the boss that you were paying attention? The panelists have
heard the presentations and read the materials, front to back, side to
side, top to bottom: now they’ve got a few things to say! Come have
some fun comparing your week to theirs.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
37
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #1

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisor.

This Report #1 begins our coverage of the Institute with reports on the Fundamentals
session on basis planning and the Recent Developments session. Report #2 will cover
Tuesday general sessions on section 199A, the different forms of families, and tax
consequences of marriage and divorce after TCJA. The next Report #3 will continue the
coverage of the Tuesday general sessions.

Basis After the 2017 Tax Act: – Important Before, Crucial Now
January 14, 2019
Lester B. Law and Howard M. Zaritsky
Fundamentals Monday Morning

ABA Reporter: Mary Elizabeth Anderson | submitted: January 15, 2019

Since the enactment of the 2017 Tax Act, basis planning is more important to clients.
This presentation briefly discussed basis rules and a shift in estate planning standards,
then focused the bulk of the presentation on basis planning techniques to create new basis
opportunities including general powers of appointment, up-stream power of appointment
planning, and opt-in community property trusts.

1. Introduction to a few Basis Rules.

The presentation started with a few introductory comments about basis planning and the
importance of finding ways to increase the basis in your clients’ assets. Then the
presenters briefly stepped through some of the basis rules and offered the following tips
and opinions.

A. Gifts of Appreciated Property. Howard reminded us that while lifetime gifts use
carryover basis under §1015, for gifts of appreciated property, the donee’s basis, as
determined at the time of the gift, is increased by any gift tax paid at the time of the gift.
Making gifts of appreciated property may be a helpful technique for clients that have
already used their exemption.

B. Property Acquired from the Decedent. The presenters discussed that the rule for basis
adjustments under §1014 does not always require inclusion of the asset in the decedent’s
estate. Section 1014 states that the property must be “acquired from” or “passing from”

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
38
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the decedent. While §1014(b) lists several ways to meet the general rule and many of
those ways require inclusion in the decedent’s estate, §1014(b)(1) does not.

“Passes from” the decedent was the big planning tip from this discussion. For example, if
an international decedent passes property to an US taxpayer, the property is not included
in the decedent’s estate for federal estate tax purposes but the property does pass to the
taxpayer from the decedent.

C. Zero Basis Rule. Lester led the discussion on the general theory that if a taxpayer is
not certain of the basis in the property, then the general misconception is that the basis is
zero. This is a misconception and Lester reminded us that the actual rule is that the
taxpayer must present sufficient information to establish basis in the property. The
evidence does not have to be exact, close enough is good enough. If the standard is met,
then Section 7491 provides that the Service has the burden of challenging it and proving
a different basis. Howard opined that many agents use the threat of zero basis as leverage
to negotiate a settlement. You should provide your proof for basis and if the Service does
not like it, then they have to provide their analysis.
D. Basis Consistency Rules. Lester led the discussion on the new basis consistency rules
and Form 8971. For clarification, there is a zero basis rule here for late discovered
property which Howard did not find offensive because if the Service cannot receive a tax
on the property because it was discovered after the limitations period and the return
cannot be adjusted, then the taxpayer should not receive basis on the property either.
Lester mentioned that the zero basis penalty and the no estate tax windfall might not
relate to the same taxpayer. The take home tip from this subject is that while reporting
may be annoying and very time consuming, there are no penalties for over reporting.
Convince your clients to pay the extra costs upfront and take the time to adequately
report everything because the penalties for under reporting are more serve than the cost of
over reporting.

2. Portability Planning.
This part of the presentation started with Lester cautioning about properly documenting
your client discussions about whether to file a portability return. With the current high
exemption amount, clients may not be inclined to spend the extra cost to file a portability
return. If the assets appreciate or the exemption deceases, then hindsight remorse could
land an attorney in trouble unless there is a note in the file that shows the attorney
discussed the pros and cons of filing a portability return and that the client decided to
forgo the return.
Lester and Howard agreed that the “new standard plan” for all clients should be a
portability styled plan. Lester stated that if you run the numbers the portability styled plan
with the double basis adjustment almost always come out better than the old credit
shelter/by-pass plan.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
39
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

3. Basis Planning with Credit Shelter Trusts.

This section started the in-depth discussion of basis planning. The presenters discussed
four techniques that can be used to include trusts that would otherwise be excluded from
the primary beneficiary’s estate upon his or her death. Howard notes that these techniques
are not just for the surviving spouse and the credit shelter trust. These can work with any
irrevocable trust that would otherwise be excluded from a beneficiary’s estate. If the trust
is a dynasty styled trust spanning several generations, then you could look to modify the
trust or provide in the initial drafting for all beneficiaries to have a general power for
basis purposes. Howard also recommends using a non-adverse party’s consent for the
exercise of the general power so that the beneficiary cannot unexpectedly divert the
assets.

A. Independent Trustee and Broad Distribution Discretion. This technique is the simplest
way to include assets in a surviving spouse or primary beneficiary’s estate. The trustee,
under the trust’s distribution standard, makes a distribution of the assets out to the
beneficiary. The assets are now owned by the beneficiary and, upon the beneficiary’s
death, receive a new basis adjustment under §1014. This may not work if distributions are
subject to an ascertainable standard (health, education, maintenance, and support), but if
the trust allows for the appointment of an independent person to serve as trustee and
provides that if an independent person is serving then the distribution standard is in the
trustee’s sole discretion, then creating basis is a simple process. This technique allows the
trustee to pick the best assets to distribute and to leave the depreciated or assets that are
not going to be sold in the trust. This technique, while simple, does have risks. The
independent trustee may not act because of risk of getting sued by the remainder
beneficiaries. This requires a transfer of the assets out of the trust which may take time
and could divert the assets away from the trust beneficiaries if the primary beneficiary’s
estate plan is different than the trust, and the assets can be subject to the creditors (and
predators) of the primary beneficiary.

B. Contingent Formula General Power of Appointment. This technique requires the trust
instrument to provide the primary beneficiary with a general power of appointment.
Lester explained that the power should be drafted as a formula that only applies to the
appreciated assets. Howard cautioned that the general power of appointment should be
drafted so that it applies to the gross taxable estate of the powerholder rather than the
taxable estate after deductions. His caution is based on Kurz v. Comm’r, 101 T.C. 44
(1993), in which the Tax Court held that a general power of appointment must have
independent legal significance. If the general power is maximized to take into account the
powerholder’s taxable estate less deductions, then the powerholder can change the scope
of the general power by leaving his or her individually owned assets in a manner that
generates marital or charitable deductions. Although the general power will be less
efficient (leaves some basis on the table), the risk of challenge is reduced if the general
power does not take deductions into consideration.

C. Trust Protector Grants the General Power of Appointment. Similar to the technique
above, this technique allows for the primary beneficiary to receive a general power of
appointment, but instead of being baked into the trust instrument, the trust instrument

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
40
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

provides that a trust protector (or similarly named independent person) has the power to
grant a general power of appointment to any trust beneficiary. This allows for more
flexibility and future planning adjustments. Lester opined that the best method for the
closest formula is to have the trust protector pick and choose the assets. Howard
referenced Steve Gorin’s advice to couple the formula general power with a trust
protector. This allows for some basis automatically, plus two additional ways to enhance
basis – by trustee distributions and action by the trust protector.

D. Delaware Tax Trap. Howard explained that triggering the Delaware Tax Trap for basis
planning offers two valuable benefits – one the power is a limited or special power not a
general power of appointment, and two the action is on the beneficiary powerholder
rather than the trustee or trust protector. The major downfall of this technique is trying to
explain the technique to the client. In a nutshell, if your state (determining which state
law controls might require some preliminary steps) has a long (but not abolished)
perpetuities period, then a beneficiary’s exercise of his or her power of appointment to
create another power that extends the trust beyond the perpetuities period causes
inclusion in the original beneficiary powerholder’s estate. This technique only works in
states that still have perpetuities period. Many states have abolished the perpetuities
period for vesting (but not for alienation) and you cannot trigger the trap if the vesting
period does not exist.

4. Up-Stream Planning.
This is a good technique for a parent who has already passed his or her assets
downstream when the exemption levels were low and now the older generation has few
assets and an exemption that would otherwise go unused at his or her death. The
technique can be used with a newly created trust or an old trust may be modified to add
the older generation person as a beneficiary.

The plan is fairly straight forward, as Lester explains, you start with your normal grantor
trust for the benefit of the grantor’s descendants and add grantor’s parent to the group of
beneficiaries. Distributions during parent’s life will be sprayed among the trust
beneficiaries and most likely only be distributed downstream to grantor’s children. Parent
has a formula general power of appointment over the appreciated assets in the trust. This
formula should be adjusted so that inclusion is the lesser of the parent’s available estate
tax exemption or GST exemption. If the parent has less GST exemption than estate tax
exemption, a poorly drafted formula could result in a mixed inclusion ratio trust. So long
as the power is not exercised and the grantor does not die before the parent, then the
grantor trust status remains unchanged but the assets get a new basis adjustment. In
addition, upon funding of the trust, the grantor does not allocate generation skipping
transfer tax exemption because the GST exemption can be allocated from the parent
when the assets are included in the parent’s estate.

This plan could be coupled with a GRAT so that after the term has expired the remaining
assets go into an upstream power of appointment trust which would allow for the GST
allocation from the older generation.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
41
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

5. Inclusion with Sections 2036 and 2038.

The last topic addressed before the break and then readdressed after the break was
whether a taxpayer could claim a substance over form argument and seek to cause
inclusion of an otherwise excludible asset under §2036 or §2038. The presenters
cautioned that taxpayers cannot generally argue substance over form to the Service
because the taxpayer is the person who selected the form. In order to make this argument
the taxpayer must present clear and convincing evidence that the original intent was
always a certain way that would have caused inclusion under §2036 or §2038 as a
retained power even though the form appears otherwise. The presenters used the classic
example of a QPRT in which the grantor never paid rent after the expiration of the term.
The form (trust instrument) would most likely provide for a rent payment, so the
substance (facts) would have to show that the grantor never intended to pay rent from the
time to trust was created moving forward.

Howard led a discussion based on the Estate of Skifter v. Comm’r, 468 F.2d 699 (2d Cir.
1972), aff’g 56 T.C. 1190 (1971), nonacq. recommended AOD (Dec. 22, 1971), acq.
1978-2 C.B. 1 as a mechanism to create a double bind on the Service so that either there
is inclusion under §2041 or under §2036 or §2038. Skifter is a life insurance case
analyzing §2042 but it has implications under §2041, §2036 and §2038. The crux of
Skifter is that in order for the grantor to have a general power of appointment, the grantor
must be materially involved in the creation of the power. Howard cautions that a
decanting is a trustee action that typically does not require the consent of the grantor, so
decanting a trust to grant the grantor a general power of appointment could fail under a
Skifter argument. Instead, Howard recommends that the grantor should bring a trust
modification action in court that grants the general power of appointment. The Service
has to choose either to the challenge the power (1) as a retained interest thereby not
§2041 inclusion but inclusion under §2036 or §2038, or (2) not a retained power in which
event there is inclusion under §2041.

6. Planning with Other Types of Trusts.

Next, the presenters discussed new trust approaches that have been created for basis
planning purposes since the increased exemption was enacted as well as a revitalization
of old trust techniques that no longer work for estate tax purposes but may work to cause
inclusion for basis purposes.

A. JEST - The Joint Estate Step-Up Trust. This technique can be used by married couples
in non-community property states. The spouses create a joint trust in which each has the
power to terminate the trust. The trust is irrevocable upon the first spouse’s death and the
first spouse to die has a power of appointment over the entire trust. On the first spouse’s
death, his or her separate assets are divided between a credit shelter trust and a marital
trust to the extent the assets exceed the exemption available. Howard thinks this
mechanism works and allows for a double basis step up on the surviving spouse’s assets
(first because of the general power and second because of ownership of the assets) but the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
42
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

downfall is that the surviving spouse is not a beneficiary of all the assets after the first
spouse dies. Lester suggested that the trust could include a trust protector who could add
the spouse as a beneficiary to the non-marital trust credit shelter trust. Howard agreed
that could work but only if the add back is not prearranged by the grantor. Howard
suggested that the Trustee should be allowed to select a trust protector rather than naming
the trust protector in the instrument.

B. The Step-Up Personal Residence Trust (“SUPRT”).

When interest rates were high, the planning technique was to give away a remainder
interest and deduct out of the gift the value of the retained life interest or term of year
interest. QPRTs are not a good play when the interest rate is low and once the term period
is over, the asset is out of the grantor’s estate and will not receive a basis adjustment at
the grantor’s death. The SUPRT technique uses a QPRT like trust with a retained term
that the grantor is not likely to survive thereby forcing inclusion of the residence in the
grantor’s estate. In addition, the trust provides that upon the earlier of the death of the
grantor or the grantor’s spouse, the property is transferred to the grantor’s spouse. The
presenters explain that this technique is better than keeping the property in the grantor’s
name because if the grantor dies first, then the property is included in the grantor’s estate,
but if the spouse dies first, then the property is included in the spouse’s estate. Either way
the property receives a basis adjustment under §1014(b)(9) upon the first death. Spouse’s
estate plan would direct that the property is distributed to the grantor if the grantor
survives the spouse. This is a good technique for an asset that will be sold after the first
spouse’s death.

C. Grantor Retained Interest Step-Up Basis Trust (“GRISUT”). The same technique as
the residence trust can be used with a modified GRIT (grantor retained income trust). The
GRIT term is for the shorter of the grantor’s life or the spouse’s life, and, upon the earlier
death, the trust terminates, and the assets are transferred to the spouse. The major
difference between the GRIT styled trust and the QPRT styled trust is that the GRIT has a
taxable gift of the income interest.

D. Tangible GRIT. Howard explains that §2702 does not apply to non-depreciable
tangible property. Art, antiques, undeveloped land can be placed in a trust with the
grantor retaining a right to use the property for a term. The main issue with these types of
trust is valuing the retained interest but appraisers are now able to work out these
numbers. For taxpayers who have income tax savings as a primary objective, this could
be a good plan.

7. Opt-In Community Property Trusts.

The presenters completed their 3-hour basis conversation with a review and critique of
the three different opt-in community property states – Alaska, South Dakota and
Tennessee. Alaska is the only state that provides for opt-in status outside of trust. All
three states allow for trusts with opt-in status and the statutes include minimum
requirements to meet the opt-in status. Howard recommends maximizing the contacts to

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
43
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the trust and the situs state to mitigate the risk of an In re Huber v. Huber, 493 B.R. 798
(Bankr. W.D. Wash. 2013) styled challenge.

The presenters wrapped up the community property discuss with a discussion of the
impact of the Uniform Disposition of Community Property Rights at Death Act
(“UDCPRDA”). Most people believe this act maintains or creates community property.
However, the presenters explained that this act creates “deemed community property”
and there is a difference between actual community property and deemed to be
community property. The code requires actual community property under state law not
deemed community property. Howard opines that a law that states the property has the
same rights as community property means that the property is not community property.
Lester discussed the confusion in Florida and whether Florida has community property
precedent under Quintana v. Ordono which appeared to give the spouse community
property like interests but the court did not hold that the interest was community
property.

Conclusion.
Basis planning is very important to clients in this is high exemption environment, but
basis is only important if it is going to be used. When planning with clients, attorneys
must determine which assets are going to need basis and when the basis is going to be
needed, then create a plan that maximize the basis opportunities. There are many
techniques available, but selecting the correct technique and exercising that technique
correctly can be challenging.

Recent Developments 2018

Steve R. Akers, Samuel A. Donaldson, and Amy K. Kanyuk

Monday Afternoon, January 14, 2019

ABA Reporter: Bruce Tannahill | submitted: January 14, 2019

The University of Miami School of Law Dean Patricia White began the afternoon session
by welcoming the attendees and remarked that this year’s Institute is the largest one ever,
with 3,400 registrants. She introduced Tina Portuondo who is in her 25th year as Institute
Director.

Tina Portuondo welcomed everyone and thanked the Advisory Committee, Faculty
Members, and Institute staff. She expressed her gratitude to everyone who attends. Steve
Akers thanked Tina for her 25 years of service and Ron Aucutt for compiling the Recent
Development materials.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
44
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

2017 Tax Cuts and Jobs Act (TCJA)

The panel began by discussing some of the Administrative follow-up to the TCJA:
Blue Book:

The Joint Committee on Taxation report on the TCJA (known as the “Blue Book”) was
released in December. Mr. Akers noted that it’s not legislative history but is closest thing
to it that we have.

Some things he noted from the Blue Book are:

1. GST exemption allocation – at footnote 372, there is a very detailed example of
the effective date of the increased GST exemption for trusts that indicates GST
exemption can be allocated to pre-TCJA gifts to a trust.
2. Kiddie Tax – a detailed example points out technical corrections needed.
3. 60% charitable deduction limitation for cash donations – the Blue Book describes
how the increased limitation interacts with the other percentage limitations.
Anti-clawback provisions:
In proposed regulations, the IRS said no clawback will occur. Mr. Akers said that the
preamble does a terrific job of explaining how gift and estate tax are calculated and walks
through how clawback might occur. On the estate tax return, a hypothetical gift tax is
calculated using the estate tax rates that apply at death and the applicable exclusion
amount available at the time of gift if greater than the applicable exclusion amount
available at death.

1. He noted that some thought the IRS might also address the off-the-top gift tax
issue. This occurs when a person makes a taxable gift of $5 million before 2025
and no other taxable gift until 2026. The regulations provide that the $5 million
gift doesn’t come off the top, leaving the remaining amount of the exemption
available when the gift was made but reduces the exemption available at death.
2. The materials note that the anti-clawback rule applies to the indexed basic
exclusion amount because the inflation adjustment is “an integral part of the
definition of ‘basic exclusion amount’”, even though the proposed regulation
example uses unindexed amounts.
3. Mr. Akers noted that, based on the portability regulations, the deceased spousal
unused exclusion amount (DSUE amount) is added to the basic exclusion amount
used in the computation.
Trust and estate administrative expenses:
For an estate or trust, Notice 2018-61 clarified that trusts and estates can deduct
administrative expenses under section 67(e) even though section 67(a), allowing
miscellaneous itemized deductions subject to a 2% floor, was suspended until 2026.
Section 199A deduction:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
45
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Prof. Donaldson reviewed significant provisions of the section 199A deduction for
qualified business income (QBI) and the proposed regulations:

1. If taxable income puts you into the 32% tax bracket, additional limitations come
into play. If it puts you into the 35 or 37% bracket, no deduction is available for
Specialized Service Trade or Business (SSTB) income.
2. Proposed regulations make clear section 199A deduction doesn’t reduce outside
basis.
3. SSTB includes businesses where reputation and skill of one or more of its
employees or owners is integral to its value. Treasury said in the preamble that it
believed Congress wanted this to be narrow, otherwise it wouldn’t have needed to
list specific occupations. The proposed regulations limit this to receiving
endorsement income; licensing or receiving income from an individual’s identity
or likeness; or receiving appearance fees.
4. He noted that a pass-through owner’s share of QBI tracks the owner’s share of
pass-through income.
5. Multiple trust rules – proposed regulations include a presumption that a tax
avoidance purpose exists if you get a significant income tax benefit unless there is
a significant non-tax or non-income tax purpose that couldn’t have been achieved
without creation of the separate trusts.

Qualified opportunity zones (QOZ):

Prof. Donaldson summarized qualified opportunity zones, which were created by IRC
sections 1400Z-1 and 1400Z-2. These provide income tax benefits for investments in
distressed communities identified by census tracts. The idea is if you invest in qualified
opportunity zones, you may:

1. Defer and potentially exclude long-term capital gains from income; and
2. Exclude all gain from investment in the fund.
He offered the following example:
Steve sells stock for a gain of $1 million and invests in a QOZ fund within 180 days. He
can defer gain until December 31, 2026, unless he sells the investment earlier. If he holds
onto it for five years, he only includes 90% of the gain in income. If he holds it for seven
years, he only includes 85% of the gain in income. If the QOZ fund investment grows to
$1.5 million and it is held for at least 10 years, the appreciation is not taxable because he
is deemed to have basis equal to the value at the time of sale. If sold before 10 years,

Steve recognizes gain.

Qualified opportunity zone fund is a corporation or partnership that has at least 90% of
assets in qualified opportunity zone property on 6/30 and 12/31 each year. Qualified
opportunity zone property includes:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
46
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

1. Tangible property used in trade or business acquired by purchase in 2018 or later

where original use starts with corporation or partnership.
2. Substantial improvement to existing property. Substantial improvement
essentially exists when the improvement cost equals the original investment in the
property.
3. Stock in a company that owns qualifying property.
4. Interests in a partnership that owns qualifying property.
Estate planning implications:

1. No step-up in basis in qualifying opportunity zone interest (IRD).

2. Gift of interest in qualified opportunity zone: ACTEC asked for clarification on
basis.
3. If trust has capital gain, does the 180 days begin when the trust has gain or when
the trust is deemed to make the distribution (12/31)?

Other 2018 Recent Developments

The panel then turned to other 2018 developments of interest:

• Badgley v. U.S. involved whether a GRAT was includable under section 2036 in
the estate of a grantor who died three months before the end of the 15-year GRAT
period. The estate said section 2036(a)(1) didn’t apply because grantor didn’t
retain possession, enjoyment, or right to income of the assets transferred to the
GRAT. The District Court said that substance over form applied and that the right
to the annuity is the same as a right to income for 2036 purposes.
• Intergenerational split dollar cases. The panel discussed developments in the
Cahill and Morrisette intergenerational split dollar cases. In Cahill, the estate’s
motion for summary judgment was denied. Within two months, the estate settled,
conceding all the split dollar issues and paying over $2 million in an accuracy-
related penalty while the IRS conceded as to the value of certain notes from
family members unrelated to the split dollar transaction. Morrissette is set for trial
in May. Ron Aucutt has said this is crunch time for economic benefit
intergenerational split dollar and it’s an uphill battle. Loan regime arrangements
may be a better option for those interested in an intergenerational split dollar
arrangement.
• Estate of Streightoff. Prof. Donaldson views this as a victory for the taxpayer. The
IRS allowed an 18% discount to the value of an almost 90% interest in an FLP
that held marketable securities.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
47
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• Crummey powers. Mr. Akers noted many have problems and should not be
regarded as boilerplate. PLRs 201837005-201837009 and 201845029 held that
the reformation of Crummey powers that were not limited to the annual exclusion
and the lapse not limited to 5&5 power was not a general power of appointment.
In addition, the GST exemption was not allocated properly but the IRS said the
allocation was effective because the GST exemption allocation substantially
complied with the allocation rules of section 2632(a).
• Estate of Turner (Turner III) – Prof. Donaldson pointed out that this case
illustrates that the right of reimbursement can be beneficial in qualifying for the
marital deduction. Here the right of reimbursement meant that the estate did not
have to reduce the marital deduction by the amount of estate taxes it paid because
beneficiaries other than the estate owned assets. However, there is NO right of
reimbursement when there is re-inclusion in gross estate under 2035 or a transfer
was still revocable under 2038.
• PLR20183011 – The IRS held that a division of marital trust on a non-pro rata
basis would not cause recognition of gain and would not disqualify either trust for
the marital deduction. A panelist observed that the marital deduction is like a dog
– usually very friendly but if poked in the wrong place, may attack you. The
problem is usually with actions by surviving spouse causing Section 2519 to
apply.
• Rev. Proc. 2018-32 – this streamlines the guidance from four prior revenue
procedures on deductibility and compliance issues into one Rev. Proc. Ms.
Kanyuk mentioned the IRS website tool to search for information on tax exempt
organizations has tons and tons of information but is “user-hostile” because it is
very hard to use and takes some hunting to find it.
• Ms. Kanyuk noted that the 2018 Form 1040 is not a postcard, as promised during
the consideration of the TCJA. It is actually two half pages (equal to one page)
and requires the use of six schedules. The compliance burden to complete it was
reduced from eight hours for the 2017 1040 to seven hours for the 2018 1040.
• Gift tax returns are now filed with the Kansas City IRS Service Center. Beginning
July 1, estate tax returns must also be filed there. Previously both were filed with
the Cincinnati IRS Service Center.
• State Tax Developments:
o Some states have backed off using the federal estate tax exemption.
o Maryland and Hawaii have adopted portability.
o Two cases involved the state estate taxation of QTIP trusts. The outcome
is very state-specific and needs to be considered in estate planning. One
result may be multiple QTIPs. Ms. Kanyuk suggested you consider the
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
48
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

math – it may be cheaper to pay some state estate tax upon the first death
than deal with multiple QTIPs.
• Kimberly Rice Kaestner 1992 Family Trust v. North Carolina Dept of Revenue;
Fielding v. Commissioner of Revenue; South Dakota v. Wayfair, Inc. – Number 1
on Ron Aucutt’s list of 2018 tax developments were cases involving a state’s
ability to tax. Wayfair was a 2018 United States Supreme Court decision
addressing when a state can require an out-of-state company to collect state sales
tax, even if it doesn’t have a physical presence in the state. The Court said you
must have a “substantial nexus” with the state to be taxed by the state but a
physical presence is not required.
Kaestner and Fielding involved whether trusts were subject to state income tax and cert
was granted in Kaestner by the Supreme Court. Mr. Akers said he wouldn’t be surprised
if cert is granted in Fielding and the cases are combined to address when states can tax
trusts based on beneficiaries’ and grantors’ presence in a state.

• Domestic asset protection trusts. Seventeen states permit self-settled asset protection
trusts. The unanswered question is whether a debtor can use an asset protection trust
domiciled in a state permitting them if the debtor doesn’t live in that state. The Alaska
Supreme Court has said Alaska can bar an Alaska creditor from bringing action in
Alaska but can’t prohibit actions in other jurisdiction. Prof. Donaldson said this is not
the death knell for asset protection trusts some say it was. The case did not address
full faith and credit or conflict of law issues. He observed that if you want asset
protection, move everything (including yourself) to an asset protection state and don’t
have creditors in any other state.

We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found at
https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/. I
n addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who will be present in Orlando in 2019 are Joanne Hindel,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; Craig Dreyer, Esq., an
attorney with the Dreyer Law Firm in Stuart, Florida; Kristin Dittus, Esq., a solo
attorney with offices in the Denver, Colorado area, Michael Sneeringer, Esq., an
attorney with Porter, Wright, Morris and Arthur, LLP in Naples, Florida, Michelle R.
Mieras, Esq., Chief Fiduciary Officer, SVP, with ANB Bank in Denver, Colorado, Beth
Anderson, Esq., an attorney with Wyatt, Tarrant & Combs, LLP in Louisville,

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
49
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Kentucky; Patrick J, Duffey, Esq, an attorney with Holland & Knight in Tampa,
Florida; Scott M. Hancock, Esq., an attorney with Winstead PC; Edwin P. Morrow III,
Esq., . Eastern U.S. Wealth Strategist for U.S. Bank Private Wealth Management in
Cincinnati, Ohio; and David J. Slenn, Esq., an attorney with Shumaker, Loop &
Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be Bruce A. Tannahill Esq., a Director of Estate and
Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will be
ably assisted in those duties this year by Reporter Michelle R. Mieras. Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
50
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #2

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisor.

This Report #2 continues our coverage of the Institute with reports on Tuesday’s morning
general sessions on section 199A, charitable giving, qualified small business stock, and
the different forms of families. The next Report #3 will conclude the coverage of the
Tuesday general sessions.

General Session 1
Getting The 411 On IRC 199A: Just the Facts Ma’am
January 15, 2019
Melissa Willms, Davis & Willms, PLLC, Houston, TX
Tuesday Morning
ABA Reporter: Bruce Tannahill

This session was designed to break down Section 199A and clear the fog, not to be an
“all things Section 199A” presentation. Ms. Willms provided an overview of the section
and the computations required to determine a taxpayer’s Section 199A deduction.
She noted that the IRS and Treasury issued proposed regulations with “what seems to be
lightning speed” on August 8, 2018. A hearing on the proposed regulations was held on
October 16, 2018 and final regulations are being reviewed by the Office of Information
and Regulatory Affairs, a subagency of the Office of Management and Budget.

SECTION 199A VOCABULARY

Section 199A introduced new terms and uses old terms in a new way. The list of terms
with definitions that are required to understand the section covers over 10 pages of Ms.
Willms’ outline. The terms include:

• Aggregated trades or businesses

• Alternative limitation
• Applicable percentage
• Combined qualified business income amount (combined QBI amount)
• Depreciable period
• Excess amount
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
51
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• Individual
• Phase-in limit, amount, or range
• Qualified business income (QBI)
• Qualified items of income, gain, deduction, and loss
• QBI component
• Qualified property
• Qualified publicly traded partnership (PTP)
• Qualified real estate investment trust (REIT) dividends
• Qualified trade or business
• Reduction amount
• Relevant pass-through entity (RPE)
• Specified service trade or business (SSTB)
• Threshold amount
• Total QBI amount
• Unadjusted basis immediately after acquisition (UBIA) of qualified property
• W-2 wages

On December 19, 2018, the IRS released a draft of the 2018 Publication 535, Business
Expenses. Ms. Willms noted that several discrepancies exist between it and the proposed
regulations:

• The regulations require a PTP to report whether it is a SSTB while Pub 535 is
silent on this requirement.
• The regulations explicitly say brokerage services for purposes of SSTB doesn’t
include life insurance agents or brokers while Pub 535 says it does.
• Pub 535 says to complete Schedule B on aggregation and keep for your records
while the proposed regulations say that the IRS may disallow aggregation if a
worksheet is not attached to the return.

CALCULATING THE DEDUCTION

At its simplest, the Section 199A deduction is the lesser of the combined QBI amount or
20% of taxable income less net capital gains. Determining the combined QBI amount is
tricky because modifications may need to be made, depending on the facts.

Ms. Willms divides taxpayers into three strata:

• Stratum I – taxpayers whose taxable income is at or below the Section 199A

threshold amount of $315,000 for married taxpayers filing jointly and $157,500
for all other taxpayers
• Stratum II – taxpayers whose taxable income is above the threshold amount but
within the added Section 199A phase-in range
• Stratum III – taxpayers whose taxable income is above the threshold amount plus
the Section 199A phase-in range

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
52
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

For these purposes, taxable income is reduced by net capital gains, which the speaker
referred to as “net ordinary income.”
The computation of the Section 199A deduction depends on which stratum the taxpayer
is in. Only taxpayers in Strata II and III are concerned with the rules on SSTBs, W-2
wages, and UBIA.

• Stratum I – these taxpayers simply take 20% of QBI and compare to 20% of net
ordinary income and the lesser of the two is the deduction.
• Stratum II – these taxpayers determine net ordinary income. Determining the QBI
component “goes off the rails” because the alternative limitation based on the
greater of 50% of W-2 wages or 25% of W-2 wages and 2.5% of UBIA must be
computed and the impact of the phase-in of the limit on deductions for SSTB
determined.
• Stratum 3 – these taxpayers also start by determining calculate net ordinary
income. Anything that’s an SSTB is ignored for section 199A purposes. The non-
SSTB QBI deduction gets more complicated because you must calculate the
alternative limitation. Now determine the QBI component, add 20% of aggregate
qualified REIT income and 20% of aggregate PTP income to get the QBI
component. Finally, the QBI component is compared to 20% of net ordinary
income.

REPORTING BY PASS-THROUGH ENTITIES

Relevant pass-through entities (RPE), pass-through entities that either operate a trade or
business or pass through qualified items from another RPE to an individual, must report
information about each trade or business to the individual.

The individual’s share of QBI is reported to them on a K-1, along with elements. On the
K-1, the information is reported in box 20 with a code to indicate type. If there are
multiple trades or businesses, each must be reported separately on K-1 or Schedule C.
RPEs must determine if a trade or business is an SSTB and report to the owner its
determination. One RPE may have both SSTBs and non-SSTBs. The individual taxpayer
then determines if it matters.

TIP OF THE ICEBERG

Performing the above calculation may require numerous other calculations. Ms. Willms
notes in her outline that Section 199A and the regulations add a new income tax wrinkle
for planning involving businesses and their owners.

Vince Lackner, president of the Lackner Consulting Group, who has developed software
to do the Section 199A calculations and assist with the planning they create, said that it is
the most complicated software he has developed in decades of tax and fiduciary software
development.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
53
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

General Session 2:
Qualified Small Business Stock: The Next Big Bang
January 15, 2019
Paul S. Lee
Tuesday Morning, 9:50 am to 10:40 am
ABA Reporter: Scott Hancock

Mr. Lee started this session by referring to comments he made at Heckerling in 2018
where he stated that Qualified Small Business Stock ("QSBS") under Section 1202 was
going to mature as a planning device for estate planners as a result of the Tax Cuts and
Jobs Act of 2017. This session covered a brief history of QSBS, calculations of gain
under Section 1202, and technical definitions and considerations related to QSBS, and
certain final thoughts.

Part I – History of QSBS

Section 1202 was enacted in 1993 and has been amended several times to provide
increasing exclusion amounts based on when the stock was acquired. However, after
around twenty-five years there is virtually no additional authority for the interpretation of
Code Section 1202. Two Treasury Regulations exist under Section 1202, but only one is
relevant in interpreting Section 1202.

Mr. Lee alluded to other potential tax advantageous strategies including Section 199A –
20% deductions for pass-thru entities, Section 168(k) – 100% expensing, and Section
1400Z – Qualified Opportunity Zones, and then noted the greater long-term benefit of
QSBS under Code Section 1202.

He believes that owners should consider converting pass-thru entities that would qualify
under Section 199A to a C corporation to utilize Code Section 1202, which is permanent,
as compared to Section 199A, which is set to expire.

Part II – Calculation of Gain under Code Section 1202

Mr. Lee next reviewed an example of the gain calculation under Section 1202 on the sale
of QSBS with a $5 million basis and FMV of $100 million where a 50% exclusion
applied. According to Mr. Lee, the $95 million of gain would be subject to tax as
follows:

• $25 million is Excluded Section 1202 Gain that is not subject to tax,
• $25 million is Section 1202 Gain subject to a 28% tax rate plus 3.8%, and
• $45 million is Non-Section 1202 Gain subject to a 20% tax rate plus 3.8%.

Part III – Technical Definitions and Considerations

Mr. Lee next reviewed a number of technical definitions and considerations related to
QSBS including Per-Issuer Limitation, Qualified QSBS Shareholder, Qualified Small

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
54
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Business Stock and Original Issue, Eligible Gain, Code Section 1045 Rollover, Qualified
Small Business, and Active Business Requirement.

Per-Issuer Limitation
The Per-Issuer Limitation prescribes the maximum gain that can be excluded (or partially
excluded) each taxable year. Mr. Lee noted that when a taxpayer acquires QSBS through
a contribution of property, the "adjusted basis" for these purposes is not to be less than
the FMV. Other issues exist relating to Per-Issuer Limitation such as whether the Per-
Issuer Limitation or exclusion is to be applied against eligible gain first.

Qualified QSBS Shareholder

A Qualified QSBS Shareholder Section 1202 exclusion is available to any shareholder
that is not a corporation. Shareholders may benefit from Section 1202 if QSBS is held by
a pass-thru entity such as a partnership, S corporation, regulated investment company, or
common trust fund. To qualify, the pass-thru entity must meet certain requirements and
certain benefit limitations may apply.

Qualified Small Business Stock and Original Issue

For stock to be Qualified Small Business Stock (QSBS) it must be:

• Stock in a C corporation issued after August 10, 1993,

• On the date of issuance, issued by a Qualified Small Business, and
• Acquired by the taxpayer at its original issue:
 In exchange for money or other property (other than stock), or
 As compensation for services provided to such corporation

An "original issue" occurs when stock is issued directly from the corporation to a
Qualified QSBS Shareholder. However, the "original issue" requirement is not violated
by transfers by gift, at death, or in a transfer from a partnership to a partner. Transfers
from an S corporation to an S corporation shareholder or from a partner to a partnership
are not a permissible.

Eligible Gain
The Section 1202 exclusion and the Per-Issuer Limitation is applied against "eligible
gain", which is any gain from the sale or exchange of QSBS, which has been held by the
taxpayer for more than 5 years. Tacking of a transferor’s holding period is allowed for
permissible transfers, corporation conversions, tax-free exchanges (e.g., Sections 351 and
368), and Section 1045 rollovers.

Section 1045 Rollover

A taxpayer may defer recognition of gain on the sale of QSBS if certain requirements are
met, including acquiring replacement QSBS within 60 days of the original sale.

Mr. Lee noted the following planning considerations with respect to rollovers:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
55
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• The taxpayer has the option to elect a rollover for each sale, if there is more than
one sale of QSBS in a year.
• The rollover applies based on the amount of sale proceeds used to acquire
replacement stock.
• Separate lot accounting for rollovers is critical to maximize deferral.
• Basis in the replacement QSBS is applied in the order acquired.

Qualified Small Business

A Qualified Small Business is a:

• Domestic C corporation,
• That meets the aggregate gross asset requirement, which is that
o At all times on or after August 10, 1993,
o Before the issuance of stock,
o Immediately after issuance, and
o Aggregate gross assets do not exceed $50 million.

Mr. Lee indicated that the aggregate gross asset requirement mean may mean that all
times without exception such amount must be below the $50 million amount to qualify.
Active Business Requirement

To be QSBS, during substantially all of the taxpayer's holding period the corporation
must meet the Active Business Requirement. This requirement is met if:

• At least 80% (by value) of all of the assets are in the active conduct of one or
more qualified trades or businesses, and
• The corporation is an eligible corporation, meaning a domestic corporation with
certain exceptions.

Part IV – Final Thoughts

Mr. Lee concluded by highlighting the following as continuing issues:

• Defining transfers by gift, at death, and other transfers (or non-transfers),

• Stacking and packing (multiplying and leveraging) the Per-Issuer limitation,
• QSBS with pre-existing businesses,
• Inadvertently losing QSBS status,
• QSBS and carried interest,
• Reporting QSBS installment sales, and
• Charitable planning with QSBS and the basis adjustment at death.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
56
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

General Session 3:
Estate planning and trust management for the brave new world: it’s all
in the family…what’s a family?
R. Hugh Magill
Tuesday Morning January 15, 2019
ABA Reporter: D. W. Craig Dreyer

INTRODUCTION

Mr. Magill started the presentation by explaining how the typical American family has
dramatically changed from a two generation family to typical family today that often
spans four generations. He discussed how the generational differences often lead to
challenges in estate planning and the allocation of family financial wealth.

GENERATION ATTRIBUTES
Mr. Magill noted that in order to show the change in generations he resorted to gross
generalizations of the various generations from the Traditionalists that formed the basis
of many of the estate planning documents we use to the Millennials of today.
Traditionalists are shaped by the Great Depression and generally recall listening to the
events of D-Day on a radio. One-third of the generation lived on farms. The generation
had a strong sense of duty. Institutional commitment was very high. This generation
valued paternalism and control which shaped the way they approached estate planning.

The Boomer generation is known for Woodstock and are currently retiring in large
numbers. Boomers are shaped by the turbulence of the 1960’s, the Vietnam War, and the
presidential assassination they watched on a grainy black and white television. The
parental model was evolving, but strict obedience gives way to accommodation as
women gained time and autonomy. Some traits of the generation include optimism, hard-
working, and competitive natures. This generation competed for everything, had clear
views of good and bad, and communism versus capitalism.

Generation X was the first generation to have a two working parent household, and many
lived with divorce. Technology crept into the generation and they often taught parents
how to use technology. This was the first generation where kids came home alone and
saw pictures of missing children on milk cartons. Generation X is skeptical due to their
independence and the pragmatism necessary for their survival. They seek more balance
in work and civic lives after watching their parents’ lives.

The Millennial Generation witnessed 9/11, are digital natives, helped elect Barack
Obama, and have a broad sense of family. Both parents worked in this generation, but
parents were much more involved in kids’ lives as they had flexibility. Boomers as the
parents of Millennials created the helicopter parents. A generation of high self-esteem
where everyone got a trophy. They are very culturally and socially aware, but they carry

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
57
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

an albatross of student loan debt, and entered the job market during the recession of 2008
and 2009. They are considered first post-racial and post-gender generation.

FAMILY DEMOGRAPHICS

Mr. Magill then transitioned to how family dynamics have changed. The average
American life expectancy has increased significantly over the years. A twenty-year-old
living today is more likely to have a living grandmother than a twenty-year-old in 1900
was to have a living mother.

Married households constituted 80% of households in the 1950’s and this has fallen to
lower than 50% today. In 1960, fifty-nine percent of 18-29 year olds were married, and
today it is less than eighteen percent. Cohabitation has doubled prior to marriage.
Deferment of marriage means different economic and education levels at marriage.
Today marriage often comes after cohabitation, children, and financial security.
Marriage has many legal benefits and the Supreme Court still recognizes it as both a
basic civil right and institution central to our human existence, but the American public
favors marriage less than in the past. Many view marriage as becoming obsolete.
Today’s Generation X and Millennials often view marriage as a capstone experience
rather than a cornerstone experience as did the generations of the past. Needless to say,
there has been a fundamental change in the way the generations view marriage.

CHANGES IN FAMILY STRUCTURES

In addition to the change in demographics the family structure has also changed. In
1950’s the prototypical American family was a married heterosexual family with three
biological children. Today this is the seventh most common type of American family.
The most common household today is a single individual. Family structures are
evolving. With the traditional family structure, divorce generally happened only after the
children left.

Boomers divorce earlier and much more frequently and remarriage with blended families
are more common. One-sixth of children today are raised in blended families and 40% of
Americans have one or more step-relatives. Today we have blended sex families and
adoption of children by a third spouse without the biological spouse giving up parental
rights. This is provided for by statute in four states and judicially created in another. So,
some children now have a three-parent family that is legally recognized.

In addition, today websites match people to raise children who do not wish to marry or
cohabitate. Essentially, family by design. These sites have tens of thousands of users.
Today there is also the ability to conceive children posthumously. It is a new era of
family dynamics enabled in part by extraordinary artificial reproductive technology.

ESTATE PLANNING AND TRUST MANAGEMENT FOR A NEW WORLD

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
58
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Magill began to discuss the impacts of all these changes on the allocation of financial
wealth, evolution of trusts, and how families will collaborate. This applies in multiple
areas. For Americans who responded to recent study for people over 50, 42% have no
will, and 38% will die without a will. If a respondent had a step-child the rate of
intestacy increases to 49%, and if a child had stopped communicating with a parent, the
rate of intestacy jumps to 59%. Finally, if a person is divorced intestacy jumps to 62%.
Questions arise due to all these changing dynamics that become much more involved.
Issues include: to whom, which, how much, when, in what form, and who will serve as
surrogates.

In the modern family, ages of members of different generations are often only separated
by 10- or 15-year increments which changes the model for family planning. Concerns
about a step-parent being impediment to a children’s inheritance is often an issue with
younger spouse and older children. The traditional plan using a life estate must be
thrown out the window in many circumstances.

How people communicate about wealth has also changed. Older generations usually did
not discuss wealth with family members. Today boomers need and want to discuss
wealth issues such as wealth sufficiency, expectations about deployment, and lifetime v.
testamentary allocation; so an evolution into the design of trusts is occurring. The new
process will be less focused on transfer taxes and more on family goals.

HOW WILL TRUSTS NAVIGATE THE GENERATIONAL DIVIDE

Today trusts must navigate the generational divide between grantors and their
beneficiaries. Due to the large divergence it may be better to show actual intent in our
trusts. Providing a trust statement purpose has two audiences: first, the trustee who can
see the grantor’s unique rationale and views on the lifespan of the trust. This also helps
instruct the trustee how to use discretionary powers. These statements may also be
helpful for trust protectors. The second audience is the beneficiaries. It allows the
beneficiaries to see the grantor’s intent in a simple statement. With the broad trustee
powers, discretionary trusts with sprinkle or spray powers often put the trustee in a
problematic position unless the intent is clear. The trustee must also balance the
confidences of the beneficiaries with the objective reporting requirements of the trustee.
As a general rule, Mr. Magill noted that if people do not live in the same household, they
should not share the same trust.

In the past, the trustee role was straightforward. Today the reallocation of fiduciary
responsibility and statutory powers allow flexibility in design and powers that can
fundamentally alter the design of a trust. Today trustees are often put at odds between
their fiduciary duties which may conflict with broad authorities given by statue to allow
flexibility. Mr. Magill noted that these issues will force us to reevaluate how we proceed
with our estate planning and especially our trust design.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
59
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

General Session 4:
Make Your Charitable Estate Plan Great Again - Charitable Planning
with Retirement Accounts: Strategies, Traps and Solutions
Christopher Hoyt
Tuesday, January 15, 2019, 11:45 – 12:35
ABA Reporter: Kristin Dittus

Christopher Hoyt discussed tax effective charitable giving for this 50-minute session in
three (3) main parts with plenty of humor to keep us engaged.

PART ONE - Charitable IRA Rollover

The 2017 Tax Cut and Jobs Act (“Tax Act”) is expected to reduce the number of
households claiming an itemized deduction for a charitable gift from about 37 million in
2017 to 16 million in 2018. Instead of itemizing, many households will take the higher
standard deduction of $12,000 per person or $24,000 for married couples and lose the tax
deduction benefit of their charitable contribution.

Of donors who do not itemize, IRA owners who are 70 ½ can achieve the equivalent of a
charitable income tax deduction for up to $100,000 of charitable gifts when made from
their IRAs. For these taxpayers, all charitable donations up to $100,000 should be made
from their IRAs. Every dollar distributed to a tax-exempt charity from the IRA prevents
the donor from taking that IRA distribution as income. All donations must come directly
from the IRA to qualify. The donor should get a letter from the charity confirming the
donation and that they received nothing in return. The donor can set up an IRA through a
brokerage account with a check book to avoid the hassle of going through an IRA
administrator who may be resistant to writing multiple checks for small values. On the
tax return, the taxpayer should include the total distribution to self and to charity and then
add the 3 letters QCD next to the taxable distribution to indicate there was a Qualified
Charitable Distribution. This only works for donors who are 70 ½ whose IRAs make
these distributions, it is not available for distributions from 401(k)s.

Some clients may think of donating appreciated stock to charity, but unlike an IRA,
appreciated stock gets a step up in basis on death providing a bigger benefit to the
inheritor.

PART TWO - Income Tax Deductions for Charitable Bequests of IRD:

Prof. Hoyt went over several examples to illustrate how gifts are written in the estate plan
and how the language used will affect the tax deduction of the gift. Income in Respect of
Decedent (IRD) is a payment received after death that would have been taxable income to
the decedent. Retirement assets are biggest source of IRD. Allocating retirement assets
to charity avoids the payment of income tax on the IRD because charities are generally
exempted from paying income tax. The language used to make the gift is important and

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
60
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the taxpayer will not get a deduction unless the governing instrument provides for a gift
to charity. The best way to structure a charitable gift is to pay IRD to a charity, using a
charitable deduction as backup. The materials include examples of drafting provisions
for estate planning documents to accomplish these goals. The executor of the estate can
also be given discretion to allocate income as part of the charitable gift.

Example 1: If a gift is written as: “$10,000 to a charity; pay all income to my child,”
there WILL be a charitable estate tax deduction on 706, but NO charitable income tax
deduction on 1041.

Example 2: “Pay all income of my estate to charity, no other gifts to charity”. This
specific allocation of income WILL achieve a charitable income tax deduction on the
1041, but no charitable estate tax deduction on the 706. A typical charitable bequest
from the estate that does reference a gift of income generally will not get an income
deduction.

Economic effect independent of income tax consequences: A 2012 regulation provides

that a governing instrument that identifies income for the charitable distribution will
control only if it has an “economic effect independent of income tax consequences.” This
regulation governs the character of the income distributed and not whether an estate or
trust is eligible to claim a deduction at all. The regulation can however cause the amount
of the deduction to be less than the amount of IRD transferred to the charity.

PART THREE - Income-Based Charitable Bequests

Income tax savings can be achieved with income-based charitable bequests. A

practitioner may want to include charitable bequests in the income section of the
governing instrument to ensure the best deduction is achieved. The document can also
provide that all income up to a certain amount will be paid to charity, and if there is
insufficient income, the gift can be paid from the principal of the estate.

DNI and the two-tier system: Assume $40,000 of DNI. A mandatory payment of $30,000
to sister who is a tier 1 beneficiary will absorb DNI first, and a discretionary payment “to
daughter as needed for HEMS” makes the daughter a tier 2 beneficiary which will absorb
the remaining $10,000 of DNI. If we add a charitable gift of $20,000, the charitable
income tax deduction falls in “Tier 1.5," and will pick up the remaining DNI after tier 1.
In this case, there is no DNI left to assign to the tier 2 beneficiary.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
61
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are Joanne Hindel,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; Craig Dreyer, Esq., an
attorney with the Dreyer Law Firm in Stuart, Florida; Kristin Dittus, Esq., a solo
attorney with offices in the Denver, Colorado area, Michael Sneeringer, Esq., an
attorney with Porter, Wright, Morris and Arthur, LLP in Naples, Florida, Michelle R.
Mieras, Esq., Chief Fiduciary Officer, SVP, with ANB Bank in Denver, Colorado, Beth
Anderson, Esq., an attorney with Wyatt, Tarrant & Combs, LLP in Louisville,
Kentucky; Patrick J, Duffey, Esq, an attorney with Holland & Knight in Tampa,
Florida; Scott M. Hancock, Esq., an attorney with Winstead PC; Edwin P. Morrow III,
Esq., . Eastern U.S. Wealth Strategist for U.S. Bank Private Wealth Management in
Cincinnati, Ohio; and David J. Slenn, Esq., an attorney with Shumaker, Loop &
Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be Bruce A. Tannahill Esq., a Director of Estate and
Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will be
ably assisted in those duties this year by Reporter Michelle R. Mieras. Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
62
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #3

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisor.

This Report #3 continues our coverage of the Institute with reports on Tuesday’s morning
general sessions on section 199A, charitable giving, qualified small business stock, and
the different forms of families. Report #4 will cover the Wednesday morning general
sessions.

Heckerling Specials from Vendors:

1. TaxBird is offering a free one-year subscription to its app, which automatically

tracks presence in states for residency tax purposes, for practitioners who come by their
booth during Heckerling.

2. The Freedom Practice is offering a free 20-minute evaluation at their booth to see if
their firm fits an attendee’s needs. They are also offering a $2000 discount on their Test
Drive Event, and a $2500 discount on their Blueprint program, but these discounts are
only available during Heckerling.

General Session 5
Marriage and Divorce – After the 2017 Tax Act
January 15, 2019
Carlyn S. McCaffrey
Tuesday Afternoon 2:00-2:50
ABA Reporter: Michelle Mieras

Ms. McCaffrey began by stating that marriage is a relationship with tax consequences;
some good, some bad, and that asset transfers due to the termination of a marriage may
also carry tax consequences.

When Does a Marriage Exist?

Although federal law governs tax consequences, state law determines whether a marriage
exists. For purposes of federal tax law, a couple is married if the couple is in a marriage

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
63
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

valid under state law, or the law of a territory or possession of the US. Whether a couple
is divorced is also a matter of local law. For purposes of federal income taxation, a
couple is married for the entire tax year if they are married on the last day of the tax year,
and a couple is treated as not having been married during the year if they are not married
on the final day of the tax year.

Tax Benefits of Marriage:

Ms. McCaffrey pointed out four income tax advantages of marriage:

1. A married couple filing jointly has lower income tax rates than a single person
with the same income. The 2017 Tax Act increased this benefit.
2. A married individual’s losses can offset the other spouse’s gains.
3. Married persons’ contribution base for purposes of charitable contributions are
combined.
4. Sales of assets between spouses may occur without taxable gains (if a spouse is
not a non-resident alien).

Additionally, three transfer tax advantages of marriage were discussed:

1. Married persons can make unlimited tax-free gifts to each other (if a spouse is not
a non-resident alien).
2. Married persons can split gifts.
3. A surviving spouse may take advantage of the deceased spouse’s unused
exclusion amount.

Tax Burdens of Marriage:

Ms. McCaffrey highlighted three income tax disadvantages to marriage:

1. Married couples with the same income may end up paying more taxes than
unmarried couples. Although the 2017 Tax Act reduced this tax penalty (until
2026), couples with income in excess of $600,000 pay more tax than two
unmarried individuals with the same income.
2. The 2017 Tax Act imposed limits on deductibility of state income and property
taxes. While an unmarried person may deduct up to $10,000 per year of state
income and property taxes each year, a married couple must share the same
$10,000 deduction.
3. Similarly, a married couple must share the qualified residence interest deduction
limitation, meaning that spouses are together limited to deduct interest on
$750,000 of acquisition indebtedness; the same limit as applies to a single person.

Loss of Alimony Deduction:

Alimony had been deductible by the paying spouse and subject to inclusion by the
receiving spouse in some form since 1942, until its permanent (i.e., not subject to sunset)
repeal last year. The repeal is effective for payments made under a divorce or separation
decree executed after December 31, 2018. Ms. McCaffrey noted that while legislative
history reflects intent to reinstate Gould v. Gould, the reasons for repeal are not clear.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
64
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

One possibility is revenue generation, although the estimated additional $6.9 billion in
resulting revenue represents less than 0.5% of the revenue estimated to be lost under the
2017 Tax Act, and better results may have been found simply by increased enforcement
of alimony reporting.

Ms. McCaffrey suggested placing income-producing assets into a trust that requires the
trustee to make distributions to the former spouse beneficiary, who will pay tax on
distributed income, as a replacement for the alimony deduction. The contributing spouse
will not be taxed on the income, assuming the trust is not established as a grantor trust.
This effectively splits the income between the former spouses. Ms. McCaffrey turned to
the pitfalls when planning with trusts in divorce.

Planning with Trusts in Divorce:

The 2017 Tax Act repealed Section 682, making proactive trust planning more difficult.
Historically, Section 682 protected the grantor from the bad effects of grantor trust status,
but the repeal means Section 682 would not apply to a couple with divorce instruments
signed before 2019 regardless of when a trust was created or became irrevocable.
Treasury recognized that the repeal of Section 682 was likely to cause problems, and
issued Notice 2018-37. ACTEC responded, stating that the IRS should promulgate
regulations that turn off Section 672(e) after divorce. Unless and until this occurs, trusts
that are to be set up pursuant to marital settlement agreements need to be created after the
divorce is effective in order to avoid the grantor trust consequences of section 672(e).
Ms. McCaffrey suggested that separation agreements not require the creation of a trust to
satisfy obligations to a spouse, but instead give the paying spouse to option to either pay
alimony or satisfy their obligations by setting up a trust.

Addressing Pre-Existing Trusts:

The fact that the repeal of Section 682 is tied to the date of the divorce or separation
agreement creates additional problems for existing documents. ACTEC also submitted a
letter requesting that the effective date of repeal of Section 682 be changed, citing that
irrevocable trusts are traditionally protected from changes in the law. In the meantime,
consider including in marital settlement agreements a provision to reimburse the grantor
for taxes paid. Ms. McCaffrey identified options to restructure existing trusts through
alternative methods, such as distributions or decanting.

Gift Tax Considerations When Creating Trusts During Divorce:

Ms. McCaffrey then discussed potential gift tax consequences. Section 2516 provides an
exception from gift tax for transfers made pursuant to marital settlements within certain
timeframes related to the divorce. She reminded the audience of the applicability of
Section 2702 to value an interest retained by an applicable family member at zero. The
associated regulations provide some relief if the only people with interests are the
spouses, but only as to Section 2516. This may have unintended effects if, for example,
one spouse dies before the divorce is complete. Additionally, the exception doesn’t apply
if children have an interest in the trust, which is common (e.g., lifetime interest to spouse,
remainder to children). Ms. McCaffrey presented alternatives to avoid the impact of
Section 2702, including structuring the transfer so that it qualifies as annuity trust or

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
65
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

QPRT under Section 2702, or giving the transferor spouse a POA over the remainder of
the trust exercisable among the descendants.

Alternative to Trusts in Divorce:

Ms. McCaffrey concluded by presenting an estate planning opportunity that does not
involve a trust: an entity freeze. Section 2701 causes bad gift tax consequences when an
entity has common and preferred interests and the common interests are gifted while the
preferred interests are retained. Instead, the agreement could provide that the preferred
interest is to go to one spouse, and the common interest is retained by the other spouse.
After the divorce, the transferor spouse can transfer the common interest to their children
and Section 2701 will not apply because there was no qualified family member retaining
the interest.

General Session 6:
Why can’t my Brother-In-Law Bob be the Executor of my Estate?
Considerations Involving the Selection of the Proper Fiduciaries
Stuart C. Bear
Tuesday Afternoon, January 15, 2019
ABA Reporter: D. W. Craig Dreyer

I. Introduction
Mr. Bear noted that he generally begins an estate planning meeting with a conversation to
determine who would be a good fiduciary and who are going to be the beneficiaries. He
encouraged us to ask several questions about potential fiduciaries to see if they are the
proper fit to be trustee, attorney in fact for healthcare, and agent for durable power of
attorney. He often waits until the end of the meeting to find out what financial assets the
person owns as it is important to give proper attention to the fiduciary positions.
He emphasized the importance of providing a higher level of service in the selection of
fiduciaries and to carefully explain and discuss the roles and responsibilities for each
individual. He notes it is the attorney’s job to bring forward options to the client.
Selecting the correct fiduciaries is important to ensure the plan is properly implemented.
In discussing the fiduciary role, he provided some real life explanations of their roles and
responsibilities. He notes the roles and responsibilities include general ideas like
managing assets at incapacity and distributing those assets at death, but also include the
ability to deal with disgruntled beneficiaries, receive calls from disgruntled beneficiaries,
and to invest assets without losing money. It is also important to understand the concept
of reasonable compensation may mean different things to different people. In addition,
you may want to mandate a reasonable fee to ensure the fiduciary takes a fee for the work
they perform.

II. Fiduciary Roles

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
66
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Bear then discussed the various fiduciary roles and how he explains them to clients.
Fiduciary roles in estate planning include attorney-in-fact, healthcare agent, Personal
Representative, and Trustee.

Attorney-in-Fact. An attorney in fact is essentially a person to do everything you do each

week, quarter, and year for financial matters. They review and pay bills such as credit
cards, review financial statements, asset allocations, and cash flow needs. These are all
the financial things people generally do. We are trying to replicate this person for
potentially a long time as opposed to administering an estate which is generally a finite
period of time. Looking for someone who gets things done and is observant is important.
Health-Care-Agent. The best option is to choose someone who thinks like the client. It is
important to recognize that the named representative has no duty to act in the health care
agent document. There is no way to compel people to act. You may want to ask the
person if they are willing to act. They may need to be an advocate. He notes most people
think about fairness, but you really may need someone who is zealous.

Personal Representative. The Person who settles the estate is very akin to financial
durable power of attorney. Someone who is very organized, and gets things done. A
personal representative also needs to know what they don’t know in order to know when
to hire professionals, realtors, etc.…

Trustee. A person that gets it done. Mr. Bear noted that trustees have a duty to
administer the trust, duty of loyalty, duty of impartiality, duty to control and protect
property, and a duty to inform.

III. Practitioners’ Role in Selecting a Fiduciary

Attorneys should discuss the functions that a fiduciary performs in the client’s estate
plan. Clients initially think of children as named representatives. It is important to
determine whether the clients’ kids get along and how often they see each other to ensure
this would work. Do children’s spouses get along? He encouraged us to make the client
give us examples. Is there a child who will be demanding compensation? Would
compensation to one child cause a problem? Do children have time to oversee the
responsibilities? Mr. Bear suggested we only look out to the next 3-5 years, as the plans
can be modified later. For instance, a child in medical school may not have time to
manage a $10 million estate. It is also important to consider who will work with the
surviving spouse and provide stability and continuity. Consider Googling the client’s
selection to see if anything comes up. It is also important to note that clients learn in
different ways, so writing some things and then repeating the same information in person
makes sense.

IV. Drafting Legal Documents

Mr. Bear moved on to discuss drafting documents. He noted that if you have a choice
between a Durable Power of Attorney and a Springing Durable Power of Attorney, the
client’s choice may show whether they are choosing the correct fiduciary. He noted that
he prefers the Durable Power of Attorney to make the transition smoother. If the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
67
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

principal is unwilling to give the power currently it may be a hint that the person selected
as fiduciary may not be appropriate.

In addition, he discussed the issues with multiple fiduciaries in documents. A single

fiduciary makes sense since one person owns the issue. However, multiple fiduciaries
may be beneficial as well since the burden can be spread among many individuals. He
recommends using a fiduciary protector to resolve disagreements between fiduciaries or
to appoint a new fiduciary. One recent example he noted, a neighborhood bank was
acquired by regional bank and then a national bank, so the bank the client selected was no
longer capable of providing the personalized services requested. Having the protector
allowed a new fiduciary to be appointed and it worked for everyone. He noted that adding
flexibility to these documents is especially important as disability can last a very long
time.

Mr. Bear concluded by noting that different people need different things in a fiduciary.
By way of example, not everyone needs the same shoes. Choosing the right fiduciary is
about choosing the right person at the right time. In order to ensure the correct person is
chosen, we need to speak at length with our clients about their fiduciaries, so we can be
better advisors to our clients.

General Session 7:
Forgiveness or Permission? Frank and Practical Pointers Regarding
Ruling Requests
Julie Miraglia Kwon
Tuesday afternoon January 15, 2019
ABA Reporter: Dave Slenn

PLR’S, GENERALLY
Julie addressed what subject matter can be addressed with a PLR, the process, and
provided tips along the way. Julie began by addressing how the IRS has the authority to
grant PLR requests in its discretion, and pursuant to a broad standard of being appropriate
in the interest of sound tax administration. Julie also noted other forms of guidance –
such as determination letters and information letters, where, generally, the determination
letter pertains to clearly established rules of law (so you don’t need a ruling to get
assurance) and the information letter calls attention to established principles and are
general statements of law that might be helpful.

Julie noted that PLRs are not just helpful for those who are seeking guidance about their
issue, but also for return preparers and trustees, who are more frequently requesting PLRs
or tax opinions to mitigate their exposure.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
68
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

She referred to the first Rev. Proc. of the year as the bible for preparing a PLR request.
Even though the material is typically the same, sometimes there are slight changes to the
requirements or statements that need to be included. Julie stressed not veering from the
strict requirements of the PLR request.

Julie said PLRs are most useful in the design stage when planning a transaction and the
tax consequences are not clear, and you would otherwise not proceed without the
certainty of a PLR. Query whether you should obtain a PLR if you will proceed with a
transaction regardless of a favorable PLR. You can apply even if you did complete the
transaction, but you need to submit the request before you file the return related to the
issue. There could be situations where the transaction is done, the structure cannot be
modified, but a party might need to know the consequences, even if not a favorable
ruling. On the other hand, if you seek a PLR, you might be closing off the ability to take
a position in the ultimate reporting.

What does a PLR accomplish?

A PLR is not the equivalent of a closing agreement, which is the only way to have a final
agreement between the party and the IRS with respect to the tax issue that can
permanently bind the IRS. A PLR can resolve some issues, but not the ultimate tax
liability. E.g., a trust might pass muster based on the proposed design, but the IRS can
still challenge valuation.

Julie also mentioned giving consideration to how many parties to include, such that you
include everyone who can rely on the ruling. She also recommended looking for other
avenues of relief that might be available.

Subject matter:
The IRS can decline to rule when in the interest of sound tax administration, including
resource constraints. Further, consider the IRS administers and enforces tax law, it does
not make new law. So, in framing your request, make it clear that you are not asking
them to move boundaries and announce novel principles of law – you are trying to
demonstrate that your conclusion is the result of applying existing law, although your
configuration of facts and circumstances/structure might be novel and not exactly
contemplated.

When the IRS will not rule:

The IRS will not rule if the transaction is on a return for a prior period and under review
or pending in litigation. Check the no-ruling list – the IRS annually identifies areas in
which they will not rule, and within this list, there are two subcategories. The first
subcategory is where the IRS will not issue a ruling. In the second subcategory, rulings
will not ordinarily be issued, but you have a prayer if you demonstrate unique and
compelling reasons to justify issuance.

Further, the IRS will not rule if there are automatic approval procedures, nor will the IRS
rule if you are seeking a comfort ruling. A comfort ruling request is essentially a request
for a ruling where the issue is adequately addressed by existing law. (Let’s not bog down

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
69
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the poor IRS with unnecessary questions if existing law is clear.) But if the IRS contends
the request is a comfort ruling, you should carefully consider whether the IRS is correct
as the IRS is sometimes quick to cite this as a basis for declining a request. The IRS will
not issue a PLR on alternatives or hypotheticals.

When dealing with estate tax issues -- if you file a request before a ruling is received,
extend the due date, attach the request to the return, and notify the branch office
reviewing the request that a return has been filed. The IRS tries to give a ruling within 3
months of filing the return.

Other issues (timing, revocation, etc.):

Rulings can be revoked if you misstated or omitted material facts. Some clients may not
feel comfortable disclosing sensitive information to the IRS, even though not disclosed to
the general public. There is no prescribed deadline imposed on IRS for a response,
although there is a general internal guidance of six months.

The IRS processes requests in the order received. You can, however, request expedited
processing, but will need to demonstrate compelling need for expedited handling. This
processing is granted only in rare and unusual cases.

Even if you are granted expedited handling, all this means is your request will be plucked
out of the stack and processed in a normal manner. It does not mean they will review the
request itself more quickly.

Cost benefit analysis:

Consider the costs, such as user fee (e.g., $30,000), cost for lawyers to analyze issues,
draft the ruling request, etc. This may also include ongoing dialog with the IRS,
especially if there is a complex issue. There may be a reduced user fee for persons with
gross income less than a certain amount.

Use in controversies:
Sometimes we see rulings requested in contested matters for resolving disputes. Again,
the IRS does not rule on hypotheticals, so it is advisable to line up a settlement agreement
or court order contingent on IRS ruling. The IRS does not want to step into the role of
effectively becoming the arbiter of an underlying dispute.

Process:
Consult the first Rev. Proc., then follow the instructions. There are lots of rulings where
the instructions were not followed. If you do not comply, the request will be returned to
you without review.

There is a sample PLR format where they show you the outline. Don’t be creative – the
same applies with respect to the perjury statement; use the IRS checklists and give them
what they want. There will be informal discussion along the way, but none of the IRS
oral statements mean anything until what you receive is in writing.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
70
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

You may request a pre-submission conference. The IRS has the discretion to agree to
engage in one if time permits. You can receive helpful feedback, such as where to devote
more time, how modification to the transaction might improve likelihood of favorable
ruling, etc. The IRS may notify someone in Exam you requested the conference.

Content:
Make the request easy to review. Demonstrate good faith; don’t come off hiding the ball.
Be strategic but disclose all facts that are material and relevant so they can analyze the
issues. The scope can deal with both content/substance and also parties.

When considering the ordering of issues, start with the issue handled by the branch that
would be best suited in shepherding it through. Attach copies of actual documents and
don’t paraphrase – if a proposed new trust is involved, attach draft documents so the IRS
can see it and not wonder.

In your analysis, cite any contrary authorities – do not downplay or debate what is
contrary. If you would consider it contrary if you were in their shoes, put it in there and
address it. This is not only mandatory but also shows a comprehensive analysis.
Although the request itself is in letter form and can be signed by taxpayer or
representative, the taxpayer must sign a separate declaration under penalties of perjury.

Miscellaneous:
Julie also covered Section 9100 relief (show taxpayer acted in good faith – and usually
requires showing someone falling on the sword.) The IRS does not want taxpayers to use
this for hindsight.

Finally, Julie covered situations where the IRS can revoke or modify a previously issued
PLR. This may be done on a retroactive basis – this may not happen if the taxpayer acted
in good faith and relied on the PLR.

General Session 8:
Sweet Child O’Mine: Planning for Parents of Minors
Sarah Moore Johnson
Tuesday afternoon January 15, 2019
ABA Reporter: Kristin Dittus

Sarah Moore Johnson began the lecture by having everyone stand up and then sit down as
she called off the state they live in. The states she called out are ones that allow a person's
Will to control who will be appointed as guardian. The people still standing at the end
lived in states where the Will was merely a recommendation for the ultimate appointment
of a guardian by the court. In these court appointed states, a guardian must apply and
undergo court evaluation for a number of factors that may include lifestyle, financial
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
71
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

stability, existing obligations geographical area of residence and religion. This process
often creates unnecessary delay and increases conflict within the family over who will be
guardian at a difficult time when children have just lost their parents.

Ms. Johnson went over a brief history of guardianship law beginning in England in 1660
when fathers were permitted to name a guardian for minor child under a Will, through the
industrial revolution when the "best interest" standard was introduced, and finally dealing
with challenges in the modern era of higher divorce rates and parents affected by the
opioid crisis who are unable to care for their children.

Some states bifurcate the role between a guardian over the person and a manager of
financial assets for the minor child often called a conservator or guardian of the estate, or
guardian of the property. Even where a Will names a guardian and then a trustee to
manage assets for the child, she recommends naming the trustee to also serve as a
conservator if needed in the event assets outside the probate estate require management.
This could happen if there was a wrongful death suit, or if beneficiary designations were
not properly updated on insurance or retirement accounts, leaving assets outright to a
minor child.

The Challenge of an Unfit Parent:

There are times when a biological parent is not a suitable guardian for a child. While
biological parents are generally given preference, the objecting parent should name a
guardian in the Will and complete an affidavit as to why the other biological parent
would be an unsuitable guardian. The unfit parent may bring a libel challenge against the
objecting provision in the Will, and may be able to have the provision excluded from the
Will and the court’s review. For this reason, Mrs. Johnson recommends using an affidavit
reviewed by a family law attorney.

If parents divorce and have different guardians named in their individual Wills, the later
dated document generally prevails.

Recommendations for Discussing Guardianship with Parents:

• Client Priorities. Attorneys should begin client meetings by asking if there's

anything the client specifically wishes to discuss. This will ensure the attorney is
prioritizing the same matters important to the client.
• Far Off Hang Ups. Don’t let far off future contingencies that may occur for
potential guardians scare parents away from naming someone who would be a
good guardian for the present. They can always update their guardian provision
in the future if necessary.
• Get the Child’s Opinion. Encourage parents to discuss who would be a good
potential guardian with their children. While parents may think children are too
young to handle the concept of death, she noted that many Disney movies are

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
72
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

focused on orphaned children. Some children may even be a bit too enthused for
the parents’ liking when contemplating their adoption into a different family.
• Young Adult Opinions. Young adult children, with ages based on state statutes,
and beginning at age 12 in some states are given the opportunity by the court to
weigh in on who they want as their guardian.
• Spiritual Guardian. The parent may want to appoint a spiritual guardian to help
guide the child through religious milestones.
• Multiple Guardians for Many Children or for a Special Needs Child. Families
with more than 2 children should consider the need to split up their children
among different guardians. One example given was of a family with 5 children
naming 4 guardians and a request that they meet every Sunday for a family dinner
so the children would remain close. A family with a special needs child may find
it necessary to name one guardian who can attend to the child’s personal care
needs, while naming another person to serve as an advocate for the child's
benefits and rights since these are very different roles.
• Deadlocked on Who to Pick as Guardian. If parents are having a difficult time
choosing a guardian, they could name different guardians for different times of
the year, such as during summer vacations and the school year.
Advising on Lifetime Care:
Attorneys should consider the following when advising parents:

• Cost to Raise a Child. The estimated cost of care to age 18 plus education cost is
close to $1 million per child. Children will also need additional services and
therapy to adjust after losing a parent. Parents should consider life insurance to
cover this cost.
• Pot Trust. Use a pot trust until all children reach adulthood. This pooling of assets
reflects how a parent would normally allocate money among their children.
• Financial Support for the Guardian: Provide financial support to the guardian to
ensure they continue to have a high quality of life as the primary caregiver for
your child. This may include trust assets that can be distributed to pay for
childcare, house cleaning services, a home expansion, or contribution towards a
larger home.
• Individual Lifetime Trusts. Use lifetime trusts for children rather than trusts that
distribute assets at specific ages for the best asset protection.
Forms to Complete:
Parents should complete the following forms if they have minor children:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
73
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

1. A limited power of attorney for guardian that could be used during a parent's
incapacity or absence.
2. A standby guardian form that allows the temporary guardianship of a child in the
event a parent becomes incapacitated or is deported if they are an undocumented
immigrant. Some states have an appointment of guardian form that is temporary
and does not remove the parents’ rights if the parent is only temporarily unable to
care for their child.
3. Consent to medical treatment form that allows a child care provider to obtain
medical treatment for the child. This form should include relevant medical
information about the child such as a list of current medications the child is
taking, allergies and any specific medical instructions along with a copy of health
insurance information
UTMA Accounts:
Many states have adopted some version of the Uniform Transfer to Minors Act that
allows for a custodial account to hold assets for a minor child. UTMA accounts serve an
important role, but also create a multitude of problems. The most significant problem is
that assets in the account pass out right to the child normally between the ages of 18 to
25, depending on the state. If the account is large, this distribution to a young, often not
yet financially responsible, adult is problematic. To reduce the size of the account, the
parent can pay for certain expenses such as private school or higher education, but cannot
pay for expenses that would be considered parental obligations such as child support.
Once a child attains the age where the account will be released, they are required to give
informed consent to transfer the assets. Some solutions to keep the money reserved for
the use of the child during their lifetime would be transferring the account to a revocable
trust, a domestic asset protection trust, or an LLC where the child does not have a
controlling interest.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
74
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
75
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #4

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #4 continues our coverage of the Institute with reports on the Wednesday
morning general sessions on planning and drafting in anticipation of incapacity, planning
for U.S. persons with foreign assets, and the Q&A session. Reports #5 and 6 will cover
the Wednesday afternoon Fundamental and special sessions.

General Session 9
Are You Building a House of Cards?
Bernard A. Krooks
Wednesday, January 16, 2019
ABA Reporter: Michael A. Sneeringer

I. Introduction
Mr. Krooks began his presentation by telling a story about presentations. He talked about
the “bright lights” at Heckerling, took out sunglasses, put on the sunglasses, and joked
that wearing sunglasses was recommended to him to block out the light (he took the
sunglasses off and everyone laughed).

II. Overview
Mr. Krooks indicated that we cannot protect against every contingency and noted that the
estate plans that we draft should be somewhat fluid. They should strive to carry out our
clients’ goals and avoid litigation. He noted that sometimes, even if the attorney drafts
the perfect estate plan, it is impossible to avoid litigation.

He advised that you have to ask the client the right questions and highlighted people’s
perceptions that our practice is now a commodity. He opined that the reality is people
want estate planning documents prepared for a fixed fee but then will not hesitate to sue.
Mr. Krooks highlighted that people are living longer and are more likely to get sick
before dying, including Alzheimer’s disease and dementia. Attorneys often overlook that
the client may have been appointed as a fiduciary for someone else. This knowledge is
key in case the client becomes incapacitated and cannot serve as another’s fiduciary.

III. Choice of Fiduciaries

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
76
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Krooks said that fiduciaries are key to a proper estate plan, indicating that perfectly
drafted estate planning documents will likely fail without proper fiduciaries. He
applauded the presentation of Stuart Bear on Tuesday, January 15. Mr. Krooks stated that
there are a number of factors that are important for trustees, including: duration of trust,
value of trust assets, type of trust assets in trust, who the beneficiaries of the trust are and
the distribution standards included in the trust.

IV. Trusts
A. Revocable Trusts

Mr. Krooks gave an overview of the types of trusts that clients use. He discussed in
detail revocable trusts, noting that California, Florida and other states traditionally used
these more than his home state of New York. The threshold issue of importance is the
client’s desire of maintaining control. Clients do not want to talk about what happens if
they become incapacitated but revocable trusts must have provisions in case the settlor
becomes incapacitated. He suggested provisions be included in a revocable trust to
address situations such as if the settlor, serving as trustee, becomes incapacitated but later
recovers (and how the mechanics of the trust work to put the settlor/trustee back in
power). Mr. Krooks opined that the revocable trust instrument should address the failure
of a client’s authorization to release his or her protected health information (“HIPAA”).
Mr. Krooks noted that these problems can affect people regardless of wealth, discussing
the situations of Donald Sterling, owner of the Los Angeles Clippers, and Denver
Broncos and the family of owner Pat Bowlen.

1. Amending the Revocable Trust

Mr. Krooks noted that he has seen this come up as an issue and recommended that
consideration should be given to empowering someone other than the settlor to amend the
trust if that becomes necessary or appropriate after the settlor no longer has intellectual
capacity to take this action.

2. Trust Distribution Standards

Mr. Krooks gave an overview of the various distribution standards including wholly
discretionary trust, ascertainable standards and mandatory distributions. He opined that
corporate fiduciaries prefer wholly discretionary trusts. He indicated that a contingent
special needs trust is a great idea but will add pages to your trust instrument.

Mr. Krooks discussed wholly discretionary distributions in detail, observing that using
the term may (“may make a distribution”) offers more flexibility then if the trust
instrument uses the term shall (“shall make a distribution”).

In contrast, ascertainable standards are difficult and make things complicated. He

stressed that when using boilerplate language, attorneys need to be careful, including
making sure that the provisions on one page of the trust instrument do not contradict
provisions on another page.

3. Whether the Trustee Should Consider Other Resources

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
77
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Krooks posed the question of whether clients want their trustees to consider the other
assets of the beneficiaries before making distributions. He indicated that consideration
should be given to whether the beneficiary must bankrupt his or her self before receiving
a distribution and noted that the standard of living of the beneficiary is up to what is
indicated in the trust document, not what the trustee thinks is fair. He observed that this
can be a minefield for litigation.

B. Special Needs Trusts

Mr. Krooks noted that 40 million Americans live with a disability, or 12% of the U.S.
population. He noted that 1 in 59 children have autism but clients do not like talking
about these issues. Telling a story about a client revealing important information in an
informal conversation after executing estate planning documents, he reminded the
audience that if you do not ask the client, the client may never tell you.

In working with clients who have beneficiaries with special needs trusts, attorneys need
to ask the client proper questions, review all contingent beneficiary designations of the
client, and make sure that a beneficiary cannot compel a distribution in a trust document.
Mr. Krooks noted the distinction between discretionary and support trusts – support trusts
allow the beneficiary to compel the trustee to distribute trust income or principal as
necessary for the support of the beneficiary. This can be a bad thing if the beneficiary
requires Medicaid or other government benefits so attorneys need to be careful that a
beneficiary cannot compel a distribution under a trust instrument where qualification for
government benefits is desired.

V. Choice of Agent Under Power of Attorney

Mr. Krooks indicated that Stuart Bear had discussed this topic in detail on Tuesday. He
stressed that it is a lot of work for an independent person to do this (as opposed to a
family member or spouse). In some states you can use springing powers of attorney that
take effect upon a client’s incapacity, as opposed to a state such as Florida that outlaws
springing powers (a power of attorney is effective upon execution in Florida).
A hot button issue is whether a financial institution will honor a power of attorney. He
indicated that many financial institutions want clients to sign their institutional power of
attorney form (as opposed to the attorney’s form).

Mr. Krooks asked attorneys to consider whether a gift giving power listed in a power of
attorney is appropriate? Should the gift giving power be limited to an ascertainable
standard?

VI. Digital Assets

Mr. Krooks noted that digital assets are another hot button topic. He indicated that
attorneys should have their clients make a list of all digital assets and accounts. There are
now services that will aid the client with disposing of digital assets. He discussed the
idea of performing a digital asset fire drill with the client while the client is living and

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
78
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

noted that many websites have terms and conditions that control the account of a
decedent.

VII. Conclusion

In his concluding remarks, Mr. Krooks noted that elder abuse is the crime of the 21st
century and would be one topic he and his co-panelists would discuss in more detail.

General Session 10:

Demystifying Planning for U.S. Persons with Foreign Assets
Wednesday, January 16, 2019
Michelle Graham
ABA Reporter: Dave Slenn

Michelle explained how the United States is one of only two countries that taxes based on
citizenship. A bill was recently introduced in the House that would tax on residency, like
the rest of the world. She provided the general rule that a US person is taxed on
worldwide assets – and for U.S. estate tax purposes, a U.S. person is a U.S. citizen or
domiciliary.

GLOBAL SYSTEM.

Why do we care about this issue? Michelle gave background on the main legal systems,
the common law (United States) along with the UK, India, etc. There is also civil law,
which is majority of other countries, (most of Europe, Asia, Latin America, are civil law.)
With the common law, we look to legislation and judicial determinations to form our law.
With the civil law, you just look at legislation. Another legal system is one where
countries are governed by religious law, such as Sharia law in Islam. Even within
countries, there can be variations within regions. Additionally, you may encounter a
country that features a combination of the above.

IMPACT OF DIFFERENT LEGAL SYSTEMS ON ESTATE PLANNING

What does this mean for estate planning? 5 main differences between common and civil
law that are relevant to estate planning.

1. Civil law countries generally do not recognize trusts.

2. Civil law countries may have forced heirship. This law will provide who the
decedent must leave assets to, which is often the spouse and children, with maybe
a small portion they can leave to others. In the US we have freedom of
disposition, so if we leave to the spouse, we may violate the law of the civil law
country requiring some assets go to the children.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
79
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

3. With civil law countries, assets vest immediately in the name of the heir. This is
different than the common law, where we have a personal representative (PR) or
executor, the assets vest, the PR has to pay debts, expenses, gather assets, obtain
letters testamentary to take control of assets, etc. In a civil law country, recognize
you won’t get letters there; they don’t have the concept where one is appointed as
executor. It is completely different, perhaps easier, where they often use notary
publics, which are different than our notaries. In civil law countries, the notary
public is much like a judge. They can handle documents, draft wills, legal
contracts, calculate and collecting tax. So, when a person dies, many times the
process is handled by notary public.
4. With civil law, you see a matrimonial regime. A surviving spouse may already
own half and the forced heirship rules might apply, leaving very little for the
testator to dispose of, which is one reason you don’t see people practicing in
estate planning in foreign countries. There is so little to play with, there is not
enough momentum to focus on estate planning exclusively, making it hard to find
a counterpart in a foreign country. However, Michelle observed that over the last
10 years, more attorneys are focusing on it because they see a need where people
are investing abroad.
5. Final difference, in common law, we have the estate tax, and it’s the estate that
pays the tax. In civil law, if tax is in play, it’s an inheritance tax. You have US
person is subject to US estate tax on worldwide assets, and if they have an asset
located in foreign country or beneficiary is in a foreign country with inheritance
tax, you have the potential for double taxation. However, we have foreign tax
credits and about 15 estate tax treaties.
Understanding these concepts will help you start to formulate a plan for an individual.
You are not automatically doing an estate plan like you would for US concepts; the other
country may require the owner of an asset leave the asset to a certain person, forcing you
to formulate how you can plan for that asset in global estate plan. Sharia law, for
example, may result in a son taking twice that of the daughter.

HOW DO YOU DEAL WITH THESE DIFFERENCES?

US courts will uphold choice of law provisions, but that doesn’t mean a foreign country
will uphold a choice of law provisions, especially doing so would violate a public policy
(like forced heirship.) If a client dies without will, how do we determine rules that
apply? From a common law perspective, you see courts looking at domicile at death --
that controls disposition of personal property. But for real estate, common law will look
to law where real estate is located. If client has personal property in California and only
real estate in a civil law country, California governs personal property and the law of civil
country governs disposition of real estate.

But if you ask the civil law country what law governs, they will look to nationality – so
they won’t apply the law where the real estate is located, instead, they will apply the law
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
80
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

where the person was a citizen. So there is a mismatch –– which rule governs? Some
countries have dealt with this – the EU came up with a regulation in 2015, so if client has
property in one of the EU member countries, we can look to the EU regulation that
harmonizes laws. Knowing that most of Europe is civil law – do we want forced heirship
to apply? We can elect out of the default rule and include this provision in our Will, to
get out of forced heirship.

Michelle then covered how title should be taken. You must consider whether there are
there any restrictions on foreign ownership. For example, in Mexico, if the property is
located in a restricted zone, you must take through a trust (known as a “fideicomiso.”)
Some countries allow joint tenancy with right of survivorship so that the title passes
automatically on death to the surviving joint tenant. This is not always the case in civil
law countries – even though they may look similar, when one dies, still might need to
prove who is entitled to asset.

TITLING ASSETS IN TRUST

Again, civil law countries don’t recognize trusts. Thus, you should tread carefully on
whether you want to title asset in a trust. Some civil law countries signed the Hague
convention on trusts (like Japan and Italy), and if they did, they will recognize it. But
even if they signed, practical aspects may make life difficult. Think twice about using a
typical US trust in other countries even if they signed the convention. You should talk to
local counsel to see whether it makes sense or whether it will create bigger headaches.
In some countries with inheritance tax, the trust is a third party. Generally, the closer you
are to the decedent, the lower the tax rate and the higher the exemption for purposes of an
inheritance tax. When dealing with a trust you may be dealing with highest tax rate
possible in that country and a low, if any, exemption. This could create a disaster. If you
have a pourover will, some countries will not accept the pourover to a trust. Thus, trusts
might not be best vehicle.

Another way to hold title is through an entity – a company, an LLC, etc. You can deal
with an LLC in your US estate planning documents and it might get you out of forced
heirship and no problems dealing with reporting obligations in that country. Some say
the only way to do planning is for an LLC to own foreign property but it may not work;
always ask counsel in foreign countries.

Always bear in mind, with anything in a foreign entity, you can do your client a favor if
you let them know you need to talk to their accountant. In almost all situations, an
informational return must be included with US income tax return. Otherwise, big
penalties may result that are difficult to get abated.

Some more unique way to take title – don’t see as often for US investing abroad, but she
does see for foreign clients is a usufruct. A usufruct is like a life estate, with bare title in
name of children and parents retaining a life estate. A German usufruct viewed it more
like trust, so it carries foreign reporting.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
81
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Regarding Mexico, Michelle discussed restrictions on owning property within a restricted

zone and the basics of using a fideicomiso, as well as the tax consequences. (Review the
governing documents to determine how the structure will be treated for tax purposes.)
Michelle then covered the stiftung/foundation. These are foundations that look like
corporations, with bylaws, talk about board of directors, meetings, but at end of the day,
it is administrated for the founder or descendants. If it holds passive investments, more
likely treated as foreign trust.

RECOGNITION OF WILL IN FOREIGN COUNTRY

Michelle discussed whether the will you’ve created for a client will be recognized as
valid in another country. A couple of key conventions give us guidance. See if the
country is party to a convention. One is the Hague Convention on conflicts of law related
to forms for testamentary disposition – if you have a will signed in your home country
and valid there, the signing country will accept it. With the Washington convention – if a
will has certain requirements, then the foreign country will accept as valid. Michelle
mentioned trusts and how US law looks to governing law, but foreign countries may not
(especially civil law.) One other point, even for common law, Canada and UK are
common law, both recognize trusts, but there are significant tax consequences on the use
of trusts. So in UK they will, even if revocable, they have tax on funding and tax when
distributed and a tax every ten years. In Canada, there is a 21-year deemed disposition
rule.

ONE WILL OR TWO?

Michelle discussed the pros and cons of using one will versus two wills. The benefits of
one will include it is less expensive and less chance or no chance of inadvertent
revocation of the will. Other option is a situs will; multiple wills, one for US assets and
another local will dealing with assets in the foreign country. Consider boilerplate
language that might accidentally cause you to revoke another will. If you prepared a
French one, then in the US will, you had language that said you revoked all prior wills.
So be careful. With multiple wills it may be easier to deposit the original if that is
required. How do you do that if there is only one will? You have to jump through hoops
to get it certified. Also, if dealing with a country where English is not the primary
language, you will need translation that needs apostilled, as well as working with local
counsel. Consideration should also be given to client’s privacy expectations. Michelle
closed by saying she tends to favor multiple wills but there is no bright line.

Michelle then covered important drafting issues, with emphasis on checking boilerplate
phrases and definitions (e.g., children might be defined differently in another country),
tax apportionment and the need to clearly identify the property at issue.

Michelle closed with a discussion on finding someone to do an appraisal of the foreign

assets, as well as issues with obtaining information necessary for the foreign tax credit.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
82
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

General Session 11:

Question and Answer Panel
Panelists: Steve R. Akers, Samuel A. Donaldson, Amy K. Kanyuk and Carlyn S.
McCaffrey
Wednesday, January 16, 2019
ABA Reporter: Edwin P. Morrow III

This Q&A panel covered a variety of issues including Section 199A, state taxation of
non-grantor trusts, impact of the grantor trust rules on the settlor and reimbursement
clauses, proposed regulations under IRC 643(f), asset protection issues with general
powers of appointment, anti-clawback regulations, structuring trusts to get a step up in
basis at first spouse’s death, tax impact of trust reformations and decanting GST exempt
trusts.

1. Constitutional Limits on State Taxation of Non-Grantor Trusts:

Steve Akers clarified the important news that the U.S. Supreme Court had granted cert
(agreed to hear the case) in the Kaestner case, which involves state taxation of income of
non-grantor trusts. Carlyn McCaffrey does not expect a decision this year but notes it is a
very important case for trust and estate practitioners, especially since it is likely that the
Court will also take up a similar case involving the same Constitutional due process
issues, Fielding, over which parties have also petitioned for cert. She noted that Quill
precedent cited by these cases has recently been reversed by Wayfair, but that the issues
that Wayfair overruled should not affect the main import of Quill on due process
requirements for state taxation of trusts.

2. Electronic Wills
Steve noted that not only Nevada, but Arizona and Indiana also have such statutes and
now Florida is considering an electronic will statute.

3. Section 199A qualified business income deduction

Sam Donaldson clarified that the 199A deduction is taken on Line 9 on the new Form
1040 and does not affect AGI. Publication 535 is now in draft form and will contain
more detailed IRS guidance for calculating the value to put on line 9.
Triple net leases: you only get 199A for “trade or business” – a triple net lease will not
usually rise to the level of a trade or business under Section 162 definition, although there
is an argument that it might. This is different from “self-rental” situation which is more
likely to be allowed the deduction. The Section 199A deduction is only available to U.S.
source income.

4. Grantor Trusts
Amy Kanyuk addressed taxation of irrevocable grantor trusts, which is usually
advantageous. Practitioners should draft for the possibility that some time in the future a

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
83
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

grantor may want to “toggle off” grantor trust status. The trust might also grant the
trustee discretion to reimburse the income tax paid by the grantor on the trust’s income,
but she recommends against requiring that the trustee reimburse. She noted that some
states have specific statutes that address this – NY and NH have statutes granting trustees
this power, but most states do not. In Millstein, an Ohio case, there was an irrevocable
trust that did not have such a clause and when the settlor petitioned the court to be
reimbursed, he was denied (indeed, did not even have standing to reform the trust nor
was entitled to an accounting, only the tax letter/information that trustees are required to
send to grantors). All the panelists agreed that it is good practice to have the settlor retain
the ability to turn off grantor trust status.

5. Beneficiary Creditor Protection Issues and Choice of/Conflict of Law

Steve Akers fielded a question concerning multi-state issues when a creditor tries to
enforce a judgment against beneficiaries. Restatement 3d, Section 60, comment g noted
that creditors may access trusts wherein the beneficiary is acting as sole trustee to the
extent the trustee could distribute to themselves, even if limited to ascertainable
standards. However, this is probably not widespread law – the Uniform Trust Code
Section 504(e) rejected this approach and provides protection for beneficiaries who are
sole trustees limited by ascertainable standards. Cross-state claims, however, bring up
conflict of laws issues (Restatement, 2d Conflict of Laws Section 270) and he noted that
while settlors can generally designate the state law to apply to a trust, he noted that courts
may examine whether a state has a substantial relation to the trust and whether the
application of its law does not violate a strong public policy of the state with which the
trust has its most significant relationship.

6. Proposed Multiple Trust Regulations under Section 643(f)

Sam Donaldson fielded a question on the new proposed regulations on section 643(f).
This statute allows the IRS to disregard multiple trusts with the same grantors (including
spouses) and beneficiaries. Proposed regulations would presume that there is a purpose
of tax avoidance and shift the burden to practitioners. Regulations state they are effective
for trusts entered into after Aug 8, 2018 (date of proposed regulations), but the preamble
says it should be effective for pre-Aug 8, 2018 trusts.

7. Tax Rates for collectibles, Section 1250 Gain

Under Section 1(h) gains from special assets such as 1250 gain and collectibles for
someone in a lower bracket, such as a 24% marginal rate bracket, will be taxed at 24%,
not a higher 25% or 28% rate applicable to 1250 gain or collectibles respectively.

8. Intervivos CLATs
Carlyn addressed whether there was inclusion if the grantor dies during the term of an
intervivos CLAT. Generally, no, but if the grantor retained control of who the charitable
beneficiaries may be, such as if payable to a private foundation controlled by grantor,
inclusion may occur. She noted several problems could arise if the grantor retains such

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
84
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

control and there may be negative impact even if a charitable deduction may offset some
of the inclusion.

9. Conflict of Interest, Out of State Clients

Amy Kanyuk noted that some conflicts of interests can be waived and noted that the
ACTEC website has good, recently updated conflict of interest letters publicly available
and that Friday’s Heckerling session will address engagement letters.

You can advise out of state clients on federal tax issues even if you are not licensed in
that state, but unauthorized practice of law, plus ethical requirements and malpractice
concerns should prevent practitioners from advising out of state clients without hiring
counsel in that state.

10. Creditor Protection of GPOA Powerholders and Ability to Add GPOAs

Could the mere ability of a trustee/trust protector to add a general power of appointment
(GPOA) make the trust accessible to creditors? Steve Akers did not believe this to be a
risk. He suggested a broad exculpatory clause for trustees if they do add such a power.
Merely holding a testamentary GPOA does not generally cause any creditor access but
CA, MI, NY and the new Uniform Power of Appointment Act (UPOAA) have or create
exceptions that may create creditor access even if the power is not exercised. This is
controversial and has been omitted from some states statutes that have adopted the
UPOAA.

11. IRC Sections 67(e) and 642(h)

Are legal fees still deductible on Form 1041? It depends on what are legal fees are paid
for – it has to be specific to trust/estate administration.

Excess deductions on termination 642(h) – if deductions exceed income, in the last year
of a trust, they can be taken by the beneficiaries – but for 2018-2025 these individual
itemized deductions are limited if not eliminated for individuals. A recent IRS Notice,
however, notes that if the trust/estate could have deducted the expense, they are
considering potentially allowing such deductions. IRS may issue guidance that
ultimately permits some deductions, but it is unclear when (probably not soon). Best
practice – pay the tax as if there were no deduction and then file for a refund assuming
there is – this gives you a chance but avoids penalties if wrong.

12. Charitable Donations for Seating/Ticketing Deals as Quid Pro Quo

Sam Donaldson addressed impact of new law denying deduction for donations to get
college sporting event tickets. If the donation of $X is required to get special seating, this
is a quid pro quo and may deny the deduction. If someone pays $5,000 more than what is
required to meet this threshold, perhaps the additional amount is deductible.

13. Step Up in Basis at First Spouse to Die Outside of Community Property State

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
85
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Carlyn addressed a double step up in basis technique designed to achieve a new basis
(step up) under Section 1014 at the death of either spouse (sometimes called an estate
trust). A transfers assets to trust for B, payable to B’s estate at B’s death. A’s trust is a
completed gift but still in A’s estate under 2038 due to A’s retained control. It qualifies
for the marital deduction because B is sole beneficiary and it pays to B’s estate at death.
So, it is in first spouse to die’s estate regardless of who dies first. Carlyn thinks this is the
right result and has used this trust before.

14. Super Long Term GRATs

A 99-year GRAT raises administrative complexities but it should still work as an estate
planning strategy if interest rates rise – Badgley affirmed the regulations on this – the
portion includable is that portion necessary to continue to pay the remaining annuity.
Example- A creates 99-year GRAT when the section 7520 rate is 3.4%, but if the section
7520 rate goes up to 5%, then only a portion of the GRAT necessary to pay the annuity
(calculated w/5% rate) will be included in the estate.

15. Exiting Marital Trusts

A question concerned marital trust with ascertainable standards where the trustee wants
to give more to allow surviving spouse to make gifts. Amy asks, “could this be used to
disinherit the remaindermen?” You must read the document. You can usually only
decant if document allows or state law permits, most state decanting statutes require
broad discretion.

With a QTIP, consider bifurcating the trust and then the spouse might disclaim/release a
portion of the trust, which will implicate the Section 2516 gift tax rule.

Steve noted that if distributions are made in excess of trust standards, they might even be
ignored under the Lillian Harper case. He highly recommended Read Moore’s prior year
Heckerling material on QTIP trusts and exit strategies.

16. UPAIA/UFIPA/Fiduciary Accounting

If an entity makes a distribution of more than 20% of its gross assets, it might be
allocated to principal rather than income for fiduciary accounting purposes. It is unclear
how this is calculated but is probably book value rather than market value and the new
Uniform Fiduciary Income and Principal Act (successor to Uniform Principal and Income
Act) Section 401(e)(2) changes this further and clarifies.

17. Anti-Clawback Regulation

The regulations are very taxpayer-friendly but do not address GST. What about
portability? It also appears that this is favorable if taxpayer has DSUE and dies after
2025 when basic exclusion is reduced. The panelists were not concerned with clawback
of GST.

18. Installment sale of assets to IGT and Beneficiary Guarantees

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
86
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

If a loan is involved in an installment sale to grantor trust with a beneficiary giving a

guarantee and the trustee pays the beneficiary a guarantee fee, the beneficiary takes this
into income but the grantor cannot take a deduction – although the payment should be
attributed to the grantor, it would be a miscellaneous itemized deduction, thus denied per
tax reform for years 2018-2025.

19. Choice of Trustee

If client has no children/friends and does not want a bank/corporate trustee, who should
they choose? Tough question – perhaps have corporate fiduciary with a friend as
distribution advisor, or allow beneficiaries to choose successor trustee.

20. Tax Effect of post-mortem reformations

If after a client has died it is found that marital deduction would be disallowed, can a trust
be reformed to qualify? Carlyn distinguished “scrivener’s error” cases v. simply
rewriting trust – the IRS is more accepting of scrivener’s error reformations and she cited
Krauss v. Comm. for allowing a deduction in such an instance, but in most cases the IRS
will not give such reformations tax effect even if pursuant to state law (she cited Rapp v.
Comm. where beneficiaries/court reformed trust, but court did not allow it to apply
retroactively for tax purposes).

21. Dual Trustee Arrangements - one beneficiary/trustee and one disinterested trustee
What are the downsides to this arrangement? You need to limit self-distributions to
HEMS, but disinterested trustee can go beyond this. Distributions to beneficiaries are
“toothpaste out of the tube” and close off planning opportunities. If step up in basis is the
goal, you may want to instead grant a general testamentary power of appointment.

22. GST Exemption (is there a potential loss via decanting)

If you decant a GST exempt trust to extend the duration, do you lose GST exempt status?
There are four exceptions in grandfathered GST regulations – you can extend the RAP
but not beyond the savings clause in the trust instrument. Steve noted that while the IRS
sought comments on decanting it is very unlikely to issue guidance soon on the tax
effects of decanting. They have never said the GST exempt allocation is completely lost
if you make modifications. There is no authority for the IRS to change the inclusion ratio
for a modified trust over which GST exemption was allocated– but he noted in planning
mode one might be more conservative.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
87
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
88
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #5

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #5 continues our coverage of the Institute with reports on some of the
Wednesday afternoon special sessions. Report #6 will have the additional Wednesday
afternoon special and Fundamental sessions.

SPECIAL SESSION I-A

IRC 199A: GRAFTING A NEW BRANCH ONTO THE CHOICE-OF-
ENTITY DECISION TREE
Melissa J. Willms, Ann B. Burns, and Daniel H. McCarthy
Wednesday, January 16, 2019
ABA Reporter: Patrick J. Duffey

The panel explored the background and structure of Code Section 199A before delving
into the new section’s impact on estate planning and the new choice-of-entity analysis
that it compels.

While the focus of the panel was IRC Section 199A (“199A”), it also explored other
changes to the Tax Code that resulted from the 2017 Tax Act, including expansion of the
bonus depreciation provisions and limitations to the interest deduction. Those topics
were explored in more detail in the context of the choice-of-entity analysis.

The panel began with an overview of 199A, starting with its general purpose which is to
put pass-through entities “back on par” with corporations from a tax perspective.
Corporations, of course, greatly benefited from the 2017 Tax Act and now have a
maximum tax rate of twenty-one percent (21%). 199A goes about its purpose by
providing an ownership level deduction—subject to certain caps and limitations—on
qualifying income earned by a qualifying business held as a pass-through. The panel
reminded the audience that planners should keep in mind that 199A is not permanent and
is effective only through the end of 2025—clients will need to be able to live with
whatever 199A planning is in place from that point forward (or to effectively and
economically unwind that planning). With that perspective, the panel noted that—while
likely too early to know for sure—it seems that even using the 199A deduction might
become a “red flag” on audit.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
89
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Although this panel focused on the choice-of-entity analysis implicated by 199A, it did
begin with a relatively brief summary of the statutory mechanism by which the deduction
is applied. As the panel noted, that mechanism is quite complex. The analysis begins by
first asking whether the income relates to an active U.S. trade or business (“business”). If
so, the next tranche in the analysis asks whether the pass-through income from the
business includes other types of income that do not qualify for the deduction (such as
investment income). From that qualifying income, the analysis then turns to the taxpayer
and asks where that taxpayer’s income (before application of 199A) falls within a series
within a series of ranges, which the panel had termed “stratum.”

199A phases in based on an income range between $157,500 -$207,500 (single

taxpayers, trusts, and estates) or $315,000 - $415,000 (married filing jointly). The
deduction mechanism is structured first as a deduction of the lesser of a taxpayer’s
qualified business income or 20% of the excess (if any) of a taxpayer’s taxable income
less the taxpayer’s net capital gain. There is a deduction limitation applicable to
taxpayers in certain income ranges (depending upon how the TP is filing their return),
which the panel divided into three “stratum.” For those taxpayers in “Stratum I”, the
analysis is a bit simpler because the deduction limitation does not apply. The deduction
limitation does apply to taxpayers with income in “Stratum II”, but it is phased in. For
the highest income taxpayers (who are in “Stratum III”), the deduction limitation fully
applies and the 199A deduction is limited to the lesser of (a) 20% of the “qualified
business income” or (b) the greater of either (i) 50% of the business’ W-2 wages or (ii)
25% of the businesses W-2 wages plus 2.5% of the unadjusted basis of tangible
depreciable property owned by the business and used to produce qualified business
income.

The panel explored 199A aggregation requirements and strategy. Taxpayers may
aggregate businesses in certain circumstances. Basically, in order to aggregate separate
business, the following are required: (a) the same taxpayers must own 50% or more of
each trade or business for a majority of the year, (b) income must be reported on tax
returns that have the same tax year-end, and (c) the trade/business is not a specified
service trade or business. Aggregation can be beneficial if some of the trades/businesses
do not have sufficient wages. By way of example, the owners of a manufacturing
business might aggregate with the holding company that owns the real estate leased by
the manufacturing business. Once an election to aggregate is made, it is irrevocable.
Moving on to fiduciary income, the panel noted that non-grantor trusts and estates are
eligible for a 199A deduction. Curiously, there is no distribution deduction available in
computing the threshold level of income; according to the panel, ACTEC has asked
Treasury to fix this issue in the final regulations as it seems to effectively result in income
being counted twice. The panel also noted that, as written, 199A would not permit
electing small business trusts (ESBTs) to take the deduction, though they understood that
the regulations are attempting to correct that “apparent oversight.”

In discussing the strategic aspect of the choice-of-entity analysis, the panel explored a
number of considerations in structuring new entities or converting existing entities for
199A planning. Planners should first look to expectations of income and loss from

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
90
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

business operations, as to income, any non-tax plans the business might have for that
income. For example, while the C Corporation structure does not permit 199A
deduction, the lower tax rate (imposed at the entity level) may be more attractive for a
business that plans to reinvest income into the business; on the other hand, if the business
routinely distributes income to owners, a pass-through structure likely (remains)
preferable. If a business expects significant losses from operations, that too must be
examined; while those losses would flow through pro rata to owners of pass-through
entities, C Corporations could also use those losses and could carry them forward.
Another consideration is future ownership of the business—that is, whether it will
continue to be owned in whole or part by the clients or whether there will be other
owners including family members or outside investors.

The panel outlined the pros and cons of C Corporations, S Corporations, and partnerships
as well as the conversion of a tax partnership to a corporation. For example, while the
tax rate for C Corps has been significantly lowered (now 21% compared to a top
individual tax rate of 37%), there is still double taxation once profits are distributed as
dividends. In contrast, S Corporations only have a single level of taxation (at the
ownership level) and the pass-through income from S Corporations is eligible for 199A
deduction. But S Corporations have significant ownership limitations, including the
number and identity of owners and can only have one class of equity (voting and non-
voting stock is permitted, but preferred stock is not), which can make it difficult to raise
capital. Tax partnerships also have a single level of taxation (at the ownership level) and
are more flexible when it comes to ownership (number and identity of owners as well as
multiple classes of equity). Of course, pass-through income from tax partnerships is
eligible for 199A deductions.

The panel discussed conversion of a corporation to a tax partnership. That conversion

can be accomplished by a few different methods, including a conversion or merger under
state law, a “check-the-box” election, or a corporate liquidation and distribution of assets
to owners (who then contribute the assets to a tax partnership). The panel noted that
because of the various layers of tax, a conversion is typically not tax efficient unless there
is not a big difference between the FMV of the business and its tax basis.

Finally, the panel had an extended discussion on the strategy involved—including

specific techniques and structures—in structuring a sale, including whether and how to
structure as an entity sale or asset sale depending on the structure of the entity (or
entities), the assets (including the tax attributes of those assets), and the nature of the
business (including non-tax reasons for structuring and the types of buyer).

SPECIAL SESSION I-B

TAX CONSEQUENCES OF MARRIAGE AND DIVORCE AFTER
THE 2017 TAX ACT
Presenters: Carlyn S. McCaffrey, Linda J. Ravdin, Scott L. Rubin

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
91
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Wednesday, January 16, 2019

ABA Reporter: Edwin P. Morrow III

The focus of this special session was on the tax consequences of the 2017 Tax Cuts and
Jobs Act on the tax effects of marriage and divorce and is a follow up to General Session
5,

Marriage and Divorce – After the 2017 Tax Act presented by Carlyn McCaffrey on
January 15.

1. Repeal of Alimony Deduction – Importance v. Other Tax Law Changes

Carlyn McCaffrey started the session asking panelists how the repeal of the alimony
deduction has affected their practice. Firms did try to settle divorces where the issue was
important before the end of 2018. Alimony is generally modifiable after the divorce
decree, and many practitioners try to avoid the risks of later modifications if possible.
For the vast majority of couples divorcing, the alimony deduction will not matter though.
The loss of the dependency exemption and the limitation on the mortgage interest and
home equity line of credit deduction are a bigger deal both economically and
psychologically. Another overlooked impact of reform: sometimes the attorney fees
attributable to tax advice regarding alimony were previously deductible, but the 2017 Tax
Act denies such miscellaneous itemized deduction now. Payment of property taxes were
also negotiated as part of divorce, and the 2017 Tax Act caps such payments to $10,000.
Can attorney fees incurred to procure property in a divorce be added to basis? Perhaps.
Software programs that attorneys use to calculate child support and property divisions
will likely have to be modified.

2. Effect of Repeal of IRC Section 682 and Use of Trusts as Part of Divorce
Settlement
Even if a trust is a grantor trust, income distributed to a former spouse was previously
taxable to beneficiary/spouse under IRC Section 682. Linda Ravdin mentioned that use
of trusts and this Section 682 provision was always rare, even among wealthier clients.
Clients want to spend as little as possible to get it over with and most do not want
longstanding, more complicated trusts.

Scott Rubin mentioned that domestic relations attorneys and judges are not educated or
prepared to handle trusts as part of a divorce solution and divorcing parties are often
distrustful of any solution involving a trust funded by the other spouse. Carlyn
mentioned the family home is often the most likely subject of a trust as part of divorce
solution. One solution to avoid grantor trust issues that could attribute income to the
grantor may be to delay transfer until after the divorce. Scott asked how much time must
lapse – a week, a year? Carlyn replied that timing was unlikely to be an issue even if
funded a week later.

3. More focus on transferring qualified plan/IRAs for tax shifting

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
92
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Transferring tax-disadvantaged assets such as IRA/401k to the poorer and often younger
spouse is often a good solution. This use may increase with the alimony deduction
eliminated.
4. Prenuptial Agreements
What about old prenups that agree to some alimony but that were negotiated and signed
back when alimony was thought by parties to be deductible? It is very unclear how
states/courts will ultimately rule on this if contested. Some judges may uphold the
contract as written in spite of the tax law change. Others may take the changes into
account, reforming the agreement to support the likely intent of the parties based on the
law at the time.

The suggestion was made to add clauses to prenups that the parties anticipate the tax
consequences are X and if this changes the contract may be modified accordingly. This
would protect against, e.g., Congress changing the rules stating that transfers between
spouses/ex-spouses pursuant to divorce are not taxable events, or changing the alimony
rule again.

5. State law impact of alimony federal tax law change

If a state has alimony guidelines, they should be considering the tax law changes. Tax
law change may affect various states’ child support guideline calculations, because
alimony no longer affects taxable income of payors.

6. How are irrevocable trusts treated in divorce?

Courts may treat history of distributions to be available resource to beneficiary. Worry
particularly if the divorcing party is a beneficiary and also sole trustee.
Assets coming out of a trust that is used for the family expenses may become marital. A
court could impute resources to a beneficiary and award more alimony and child support
accordingly, and if the trustee refuses to pay what the court thinks they should pay based
on prior distributions the judge may simply say “ask the trustee”. Courts will not be
fooled by trustees that cut off a beneficiary from distributions a few months before filing
for divorce!

7. Panel hypothetical involving a family that has family business and

divorced/divorcing children, some of whom work in business
For family businesses, a buy-sell/shareholder agreement can at least have a right of first
refusal or discounted mandatory buy-out to prevent in-laws from acquiring shares.
Premarital agreements can address this as well, but some might “sunset” or couples may
revoke the agreement, so business owners may want to make sure any waivers are
irrevocable or address in a shareholder agreement. Using irrevocable trusts to transfer
business interests to children in lieu of outright gifts is always recommended. Beware of
trusts that allow a beneficiary to remove and replace trustee with themselves, since a
divorce judge may attribute control to them.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
93
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Premarital agreements that inaccurately list assets as “value unknown” may not be
upheld. Even if there is not an accurate appraisal of a business asset, parties should list #
of shares, recent income and other data that is known. Disclose what is known and shift
burden on other side to ask for more information and have agreement say that the parties
are satisfied with disclosure.

If someone’s work/services contribute to growth of a business asset that is separate, it

may cause growth to be marital property.

Pay attention to the potential for different state laws may apply, and state law may
change. Fifteen states follow an “all property” model, such as MA, making the use of
prenuptials agreements and trusts even more important.
A post-marital agreement may be a solution in many states to fix bad pre-nuptial
agreement or lack of one. A business owner can often modify company agreements if he
or she is a controlling shareholder/member, which can affect children’s interests.

8. Recommended Trust Clauses and Provisions

Carlyn also recommended various trust designs and provisions that help in the divorce
context – avoid mandatory distributions, grant a limited power of appointment that
excludes ability to appoint to spouse, trustee power to pay “to or for the benefit of” rather
than directly to beneficiary outright and maybe a 5/5 power and right to remove and
replace trustee.

SPECIAL SESSION I-C

PREPARING FOR THE UNEXPECTED: DESIGNING AND
DRAFTING ESTATE PLANS THAT CAN WITHSTAND THE HEAT!
Craig C. Reaves, Bernard A. Krooks, Margaret G. Lodise
Wednesday, January 16, 2019
ABA Reporter: Joanne Hindel

INTRODUCTION

Interpretation of trust terms is not always clear and sometimes “mayhem shows up”.
Generally, if your client is involved in litigation there is likely a lack of planning or
ambiguity in terms or possible elder abuse. Ambiguity can be intrinsic or extrinsic-
extrinsic is harder to get in front of the court.

PART I – DEFINITION OF INCAPACITY

What happens when the settlor becomes incapacitated?

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
94
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

California has gone further than most states in viewing capacity as a sliding scale – the
statute evaluates capacity on a functional level.

In the Sterling case the trust involved actually referred to the California statute. The
determination of incapacity had to be made by two independent physicians –
qualifications were spelled out in the trust terms.

The incapacity definition in a trust should address application to the settlor but also
trustee – in Sterling the settlor was also a trustee. Determining incapacity may involve
HIPAA issues- there needs to be a waiver in the document so that physicians can release
determinations without violating HIPAA rules.

The panelists discussed inserting a clause that would require any trustee to submit to the
release of medical information to avoid HIPAA rules- one of the attendees recommended
that this should only be available with a showing of cause but the panelists said the
problem is how to determine cause.

PART II – TRUST MODIFICATION IN THE EVENT OF INCAPACITY

Can you modify a trust while the settlor is alive but incapacitated?

Many trust instruments include provisions for modification in the future, and some
include language authorizing modification by various third parties in addition to the
settlor. This falls under the general concept of “substituted judgment”.

The panelists discussed inserting a clause that provides that, in the event of incapacity of
the settlor, the trust will become irrevocable. This is not a gift if the settlor still retains a
power of appointment.

Allowing a trust protector to amend a trust might raise issues regarding appropriate
actions by the trust protector. Do documents generally provide a mechanism for
challenging the actions of the trust protector?

Settlors are generally receptive to allowing trust protectors to change trustees but not
change trust terms.

PART III – USE OF POWER OF ATTORNEY TO ASSIST AN INCAPACITATED

PERSON

Two types of challenges to POAs generally occur: (1) challenge to the validity of the
POA itself and (2) challenge to the actions taken by the agent.

Two cases were reviewed in which POA agents acted pursuant to valid authority but their
actions benefitted them to the detriment of others previously intended by the Principal to
benefit from the Principal’s assets.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
95
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

An exoneration clause in the POA document will not change the increased scrutiny
applied by a court to the actions of a POA Agent.

Clients are often nervous about giving POA agents the authority to gift. One suggestion is
to limit the gifting authority to present value gift amount or only to persons and entities
that the Principal has gifted to in the past. Another possibility is to allow gifting in order
to qualify for needs based long-term care (Medicaid).

If the Agent is also able to gift to him/herself, is this a license to steal?

The panel moved to a discussion about elder abuse and the execution of POA documents.
Most elder abuse is perpetrated by family members. The Senior Safe Act allows reporting
of suspicious activity which does not run afoul of privacy concerns.

PART IV- STANDARDS FOR TRUST DISTRIBUTIONS TO A BENEFICIARY

Ascertainable standards – how clear are they to settlors and trustees. Does an
ascertainable standard give the trustee enough guidance? When should the trustee
consider other resources?

If instructions are very detailed, they can end up being problematic if circumstances
change and the instructions end up being inappropriate.

SPECIAL SESSION I-D

What Do You Mean I Cannot Take That Money? Duties,
Responsibilities, and Ethics for Fiduciaries and the Attorneys who
Advise Them
Stuart C. Bear, Elizabeth (Lisa) C. Henry, Mary F. Radford, and Francis (Frank) J.
Rondoni
Wednesday, January 16, 2019
ABA Reporter: Michelle Mieras

Mr. Bear served as moderator. He noted that the goal is for the audience to have an
“aha!” moment, and realize that it is possible for attorneys to be held liable for
fiduciaries’ actions. The presentation was in the form of seven case studies based in
reality, only the basics of which are covered in this report.

CASE STUDY #1:

Susan inherited $10 million in property, which she sold to buy a lakeside mansion. She
transferred her assets into a trust which gave the trustee discretion in the event of Susan’s
disability, to distribute income and principal for Susan’s care, comfort, support and

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
96
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

maintenance. Susan became incapacitated, her sister became successor trustee, and her
kids moved in with their father, Susan’s ex-husband. The trust paid for Susan’s in-home
care costing $500,000 per year. The ex-husband sued the sister as trustee, alleging
breach of fiduciary duties by excessive spending and failing to inform him (as the
children’s guardian) of administrative and material facts that would allow him to defend
the children’s interests.

The panelists discussed whether the trust language sufficiently justified the amount
distributions being made for Susan. Several factors are material to the ultimate
determination, including the trust’s value, Susan’s lifestyle prior to her disability and her
life expectancy, but it would be preferable if the trust included language for Susan’s
support “in the manner to which she was accustomed,” reflecting that Susan was the
primary beneficiary, and stating that the trust was for Susan’s benefit even if the cost of
her care depleted the trust. The panelists concluded that the ex-husband would likely
lack standing in most states if the trust had language allowing depletion for Susan.

CASE STUDY #2:

Father’s trust held real estate and directed that his assets be distributed outright in equal
shares to his four children after his death. One son, Joe, served as successor trustee. The
beneficiaries could not agree on how to divide the assets in kind, and agreed to sell and
distribute the proceeds equally. Joe used some trust assets to purchase a home for his
family, which his attorney indicated was fine because Joe was a beneficiary. Joe’s wife
then filed for divorce.

The panel identified and discussed various issues with Joe’s actions, including self-
dealing, lack of impartiality, failure to inform, and failure to act in good faith. In addition
to these breaches of fiduciary duty, Joe has likely exposed himself to claims of
conversion, theft (civil and criminal), and financial exploitation. Joe’s attorney
committed the ultimate sin of not being competent in the field in which he was practicing.

CASE STUDY #3:

Lois has two sons, Tim and Scott, who are both police officers. Scott was mom’s agent
under her financial POA, and they shared a joint account. Lois gets dementia and Scott
begins looking at facilities for her. She finds out, changes her POA to appoint Tim as her
agent, and changes ownership on the bank account to replace Scott with Tim. Tim
decides that Lois needs a practical vehicle to drive around their hilly town in the snow
and buys a Jaguar convertible using the majority of Lois’s liquid assets. Lois is
distraught, but doesn’t want to get Tim into trouble. Lois passes away.

Mr. Bear discussed the criminalization of financial exploitation in a majority of states,

and the factors involved in proving financial exploitation: 1) the victim is a vulnerable
adult, 2) the perpetrator knew the victim was vulnerable, 3) the perpetrator was in a
position of trust or confidence with the victim, and 4) the perpetrator illegally uses the
elderly victim’s funds or knowingly and by deception or intimidation gained control over

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
97
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the victim’s assets. Here, there is likely a case against Tim. He may also be subject to a
claim of conversion.

Mr. Bear shared an appalling attorney regulation case, where attorney would drive 45
minutes to visit her in a nursing home, charging twice his normal hourly rate for those
visits. The attorney asserted that his client wanted to go on Sunday drives in style,
justifying his purchase of a Lexus with her funds. He also said that because client liked
specific fancy furniture, he furnished his house with that furniture (at her expense) as
incentive to move out of the care facility eventually, and then proceeded to charge her
rent for storing that furniture. While that may be an extraordinary example, attorneys
need to be vigilant in looking for red flags and help their clients address them timely. Red
flags to look for include lack of transparency or receiving/giving incomplete information,
changes in lifestyle, large or unnatural purchases, changes in representative, changes in
account ownership, and changes in long-standing plans. Attorneys need to get out of
their comfort zones and push for information when these issues arise.

The panelists discussed mandatory reporting requirements. Prof. Radford pointed out
that in a few states, attorneys are mandatory reporters of financial exploitation of elders,
and are allowed to break confidentiality for reporting purposes. But in the majority of
states, the attorney must honor Lois’s request to keep the information confidential. The
attorney may wish to counsel Lois about mandatory reporting requirements, as she might
inadvertently talk to someone who is a mandatory reporter. The only other loophole to
justify breaking confidentiality exists in a few states to prevent/rectify a crime by client
or a third party, particularly if there may be substantial bodily or financial harm. Look at
the rules of your particular state, and understand the rules governing confidentiality.
Prof. Radford points out that some states have expanded the slayer statute to apply to
those who have financially abused the decedent.

CASE STUDY #4:

After dad’s death, son Charlie discovers that he was disinherited in new estate planning
documents dad executed just days before death when Charlie’s siblings took dad to a law
firm. The law firm now represents the siblings as fiduciaries under dad’s revised plan.
Charlie does not believe his dad had capacity to sign the documents. Ms. Henry noted
that this scenario happens more than she can believe.

After discussing capacity and undue influence (including a recommendation to consult

online materials produced by the American Bar Association jointly with the American
Psychological Association), the panelists addressed the attorney’s relationship to the
beneficiaries of the trust and estate. The majority of states hold that a lawyer
representing a fiduciary has an attorney-client relationship with the fiduciary and not with
the fiduciary estate or the beneficiaries. The panel considered that when an attorney
represents a fiduciary, the fiduciary’s acts or omissions may give rise to a duty or liability
to the beneficiary or ward. The panel also cautioned that in situations like this fact
pattern, remember who the client is and invite everyone else out of the room. Regardless
of who is paying the bill, an attorney’s duty is to the client. Mr. Bear waits to tell other

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
98
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

family members that they won’t be in the meeting until they arrive, so that he can observe
the family’s reaction and dynamics.

CASE STUDY #5:

Scott, a Financial Advisor, refers his long-time client to an attorney. Clients want Scott
to attend the meeting with the attorney, which can be very helpful for purposes of
information gathering and comfort. During the initial meeting, it becomes apparent that a
third-party trustee may be needed due to family dynamics. Attorney suggests a corporate
trustee, but Scott suggests appointing a family member or friend and clients think their
inexperienced friend would suffice.

After discussing the benefits of corporate trustees, the panelists considered the impact of
having Scott in the client meeting and noted the difference between confidentiality and
privilege. Prof. Radford reminded the audience that confidentiality results from our
professional rules, and privilege is related to evidence. Unless a third party’s presence is
necessary, you are likely not having a privileged conversation. If clients give permission
to share information with another of their trusted advisors, get it in writing.

CASE STUDY #6:

In the course of doing asset protection planning, clients execute a deed transferring
property to children as tenants in common. The kids are given the deed, who in turn give
it back to their parents’ attorney for safekeeping. A child dies with limited assets and
significant creditors, including taxing authorities. Parents ask the attorney, “What if the
deed is never recorded?”

This brings up aiding and abetting a breach of fiduciary duty. Aiding and abetting cases
do not require that the attorney owe any fiduciary duty; there could be direct liability
even without an attached duty. The panelists commented on federal cases that recognized
aiding and abetting breach of fiduciary duty despite the underlying state courts having not
recognized the claim. It’s likely, therefore, that even if your state hasn’t opined on the
tort claim, it would be recognized. The requirements are not clearly defined, but appear
to require a breach of fiduciary duty by another, knowledge of the breach by the aider and
abettor, and substantial assistance in the breach. Katerina Lewinbuk’s article, “Keep
Suing All the Lawyers: Recent Developments in Claims Against Lawyers for Aiding &
Abetting a Client’s Breach of Fiduciary Duty,” is recommended reading.

CASE STUDY #7:

The final case study involved a well-heeled decedent who died intestate without a spouse
or children, leaving six siblings as his heirs. Attorneys for the heirs were seeking
payment of their bills from the estate. As the panelists donned wigs, sunglasses and at
least one purple toy guitar, they disclosed that this fact pattern was based on Prince’s
estate. When is it appropriate to pay legal bills from the estate? The baseline question is
whether the activity was related to the estate and not just for the benefit of one

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with permission.
All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or
99
stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

beneficiary. Additionally, the court will consider reasonableness of fees in light of the
work performed.

CONCLUSION

The panelists concluded with a cautionary message: understand your duties,

responsibilities and potential liabilities as an attorney. Wade carefully. If your clients go
down the drain, you don’t want to go down with them.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
100
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report 6

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #6 continues our coverage of the Institute with reports on the remaining early
Wednesday afternoon Special Sessions and the first Wednesday afternoon Fundamentals
session. It begins our coverage of the late group of Wednesday Special Sessions.

FUNDAMENTALS 2
Evolutionary planning: 20 or so ways to increase client happiness and
value to your practice with planning and strategic practice techniques
Louis Harrison and Nancy Hughes.
Wednesday, January 16th ABA Reporter Kristin Dittus

Today's practice must be nimble to keep pace with the always evolving economy and
modern technology. This informative 90-minute lecture covered tips and ideas to add
value to your practice and the client experience at your firm.

Mr. Harrison began the lecture by reading a passage indicating attorneys may be phased
out by improvements in technology and clients’ resistance to attorney fees. He feels,
however the reality is quite the opposite as attorneys can tailor our practice to keep pace
with the new and emerging needs of our clients.

ADAPTING THE TRUST FUNDING FORMULA TO A SINGLE FUND QTIP TRUST

Since the creation of the QTIP trust in 1982, when the estate planning exemption was
$600,000 there have been significant and frequent changes in the approach to estate
planning. Many practitioners continue to use trust funding formulas with the Applicable
Exemption Amount (“AEA”) amount passing to a credit shelter trust and any remainder
passing to a marital deduction trust. With the AEA amount at $11.4 million for 2019 and
portability, consider simplifying your forms to use a single fund QTIP Trust. This will
reduce both the complication of your documents as well as the risk of making mistakes
on a complicated trust funding formula.

MANAGING CLIENT EXPECTATIONS

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
101
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Be realistic when giving your clients an expected return date on work. Every client wants
to be the number one client whose work is turned around as quickly as
possible. Establish a calendar schedule that allows you to have time with clients and
sufficient time to get the work done and out the door. Ms. Hughes sets aside one day a
week to work from home where she is free from the distractions of her office and able to
get significant work done.

BREAK UP BIGGER PROJECTS INTO SMALLER PIECES

For clients that have bigger projects, breaking it down into smaller pieces will allow you
to continuously get work back to the client as well as bill the client in regular intervals for
work completed. This gives the client a sense of movement on the work, allows you to
continuously bill and get paid, avoid a giant bill at one time that a client may feel is
unreasonable and allows the client to review the work in easy to digest amounts rather
than giving them an overwhelmingly large legal package to go through.

BEING AVAILABLE AND ON CALL 24/7

We are not ER doctors, we are lawyers who deal with documents, often in non-
emergency situations. Just as you don't want to eat at an empty restaurant or see a
professional who has an open calendar, do not be afraid to push-out client meetings as
necessary to maintain your scheduled calendar so you can work in the most effective
manner for you.

Both presenters discussed the idea of giving out their cell phone numbers. Mrs. Hughes
does not give out her cell phone number, except on limited occasions. Mr. Harrison
provides his cell to clients but has not had clients abuse the privilege. Both tried to
discourage clients from texting them.

UNIVERSAL OBJECTIVES IN ESTATE PLANNING

Universal objectives for estate planning clients include money going to their desired
beneficiaries and protecting assets from predators, such as a divorcing spouse of a child,
fraudsters, the IRS and various creditors.

When the AEA was lower, the focus was largely on tax planning, however, now with a
high AEA there can be more focus on asset protection which is often more important and
relatable to the client. Many practitioners use an ascertainable standard trust and provide
for the beneficiary to be the sole trustee. Mr. Harrison recommends including the power
to appoint (and remove) an independent co-trustee, allowing for better protection of trust
assets against predators. Consider giving gifts to charity through a private foundation or
CLT.

RETITLING ASSETS

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
102
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

With the lower AEA, retitling was often done to avoid unwanted tax implications. this
however can create problems when assets are transferred to a different spouse for estate
planning purposes and then there is a divorce down the road. Changing title can cause
confusion both to the spouse receiving the gift and resentment towards the estate
planning attorney. If clients are retitling assets, consider having them sign a statement of
intent indicating the transfer is for estate planning purposes only and is not a
gift. Additionally, portability avoids the need for most retitling.

FAMILY MEETINGS

Family meetings with your clients and their family, as long as there is no legal conflict
present, are a great way to pass on family values and ethics to the next generation. As
children grow into adulthood, a family meeting can introduce what is in the documents,
why and what to expect as various events occur. It can also be an opportunity to bring in
other experts such as an investment advisor, CFP, CPA, or a life coach. Ms. Hughes
likes to bring children in once they're old enough to sign a will to get them familiar with
the process and concepts. This also makes the introduction of a prenuptial agreement
much easier. After all, it's not the child's money that is being protected, but normally
money that has been made by previous generations and inherited by the child. This is
especially important if there's a family business involved. Additionally, will contests may
be avoided if children are informed of why a decision is being made rather than surprised
upon the death of a parent. Informed children will value good legal work and keep the
next generation coming back to your office.

If there is to be an invitation to in-laws, such as spouses of children, she recommends

inviting all or none but treating all in-laws equally to avoid creating conflicts in the
family.

AVOID TRUST FUND BABIES

The family meeting is also a great place to pass along ethics and values that helped create
the original wealth of the family. If clients are not comfortable discussing dollar values,
begin with concepts of wealth preservation to pass along to their children. Rather than
meeting at the client's office which may be intimidating to the children as well as
triggering long standing parental child conflicts, try to find a warm and inviting space to
meet at. This may or may not be the attorney's office. For Ms. Hughes, her firm has a
relationship with a local art museum that has a beautiful, warm, inviting room where she
likes to have these meetings, allowing all members of the family to feel more at ease.

BUILDING FLEXIBILITY INTO IRREVOCABLE TRUSTS

There are several good options for creating some flexibility in an irrevocable trust.

- Decanting is allowed by some states under statute and can also be permitted under the
trust document.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
103
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

- Appointing a Trust Protector. Mr. Harrison, based in Chicago, has been on the drafting
committee for trust protector provisions for many years and says the committee
struggles with finding the best language for these provisions because it is a very complex
area. He prefers the next option.
- Giving a special limited power of appointment to a third party. This option can allow for
the transfer of trust assets with fewer restrictions and limitations then the above-
mentioned options.

GRANTOR TRUST ADVANTAGES

Creating an Intentionally Defective Grantor Trust (IDGT) has the number of advantages
in transferring wealth to the next generation. It is important to go over all these concepts
with your client to ensure they agree to the wealth transfer strategies outlined below,
especially taxing income back to the Grantor. Advantages include:

- Far superior to an outright gift for passing on wealth to next generations.

- Allows trust income to be taxable to the Grantor, therefore having the same effect as a
non-taxable gift to the children.
- -Adding a "swap power" allows for the substitution of assets of equal fair market value
and also makes it a grantor trust. This is an especially helpful tool to get low basis asset
out of the trust that will not get a step up in basis upon the Grantor's death and also to
get high basis or cash-equivalent assets into the trust that do not need a step-up in basis
on the Grantor's death (since there is no step up in basis for assets in the Trust, only the
assets in the Grantor’s estate)

DEATHBED PLANNING

The first thing you should talk to your client about if their family member is on their
deathbed is condolences for that family member’s illness. Attorneys may dive into the
technical legal solutions when the family member, while concerned about those issues, is
likely feeling immense grief for their loved one. If the attorney has set up an IDGT, now
is the time to review asset basis and determine any advantageous swaps that can be made.
To transfer life insurance and avoid the three-year clawback rule, the life insurance policy
can be sold to the IDGT. As a grantor trust, there is no recognizable gain and the transfer
for value rules should not apply.

WORK WITH FOCUS

Minimize distraction while working by turning off alerts and notifications. Consider
adding a delay function to your emails for two reasons: (1) if catching up on work over
the weekend consider sending out on Monday so your clients don't think you're
constantly working and should constantly be available to answer their questions at any
time; and (2) if colleagues are checking their work email, they don't feel pressured to
respond over the weekend unless it is an urgent matter. Also consider adding a delay to
your daily emails so that you can respond immediately and get it off your checklist for
clients don't forget and have this expectation that every question will be answered
immediately.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
104
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

CLIENT SELECTION

Since time is a limited resource it is important to be selective regarding who you take on
as a client. Under the 90/10 rule, we get 90% of the grief from only 10% of our
clients. Consider an annual evaluation of who your worst clients are the create the most
problem I'm saying goodbye to those people.

How do we get rid of bad clients?

- Inform the client in writing you are terminating the relationship.

- Carefully review the files before returning it to the client to remove any internal
messages.
- Inform and advise the client to complete any unfinished legal work to ensure you are
not left with any liability regarding these unfinished projects

SPECIAL SESSION I-E

Negotiating and Drafting Charitable Gift Agreements to Stay Out of
Court, the News, and the Attorney General's Office
Alan F. Rothschild, Jr., Donna J. Snyder, and Carolyn O. “Morey” Ward
Wednesday, January 16, 2019
ABA Reporter: Michael A. Sneeringer

I. Discussion Problem: Requirement for Excessive Ongoing Donor Involvement in

the Gift

Ms. Snyder discussed this first hypothetical:

T. H. Riving is a successful businessman in Everytown, MO, but he spent some time in

homeless shelters when he was a child. Because of that experience, he has become a
supporter of the local charity, Help Out Minors in Everytown (HOME). He now wants to
make a large gift to HOME to support an ambitious new program that has the goals of
finding causes and solutions for child homelessness in Everytown. T. H. wants the gift
agreement to require that:

• Program be named after T. H.,

• T. H. be part of the selection committee for each director of the Program as long as T. H.
is alive, and
• T. H. has input on specifics of what the Program will do.
• If these requirements are not met, HOME must agree to return the gift.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
105
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Should HOME accept these requirements? What might HOME propose instead? T. H.
then says his private foundation will probably be making the gift. Does that change
HOME’s responses and if so, how?

Ms. Snyder noted that naming is not a problem by itself and does not create acceptance
issues from a tax perspective. She indicated that the IRS calls this an incidental benefit.
Ms. Snyder noted that the nonbinding recommendations of a selection committee are
okay. She stressed that HOME would have to have the final say.

Ms. Snyder discussed that based on the facts of this discussion problem, a solution would
be that the parties agree to place alternatives into their gift agreement. She added that
preset alternatives in a gift agreement is the best way to go because it gives the parties
flexibility. Ms. Snyder thought that it would make a difference if T.H.’s private
foundation makes the gift because private foundations are subject to different rules in
doling out funds than an individual donor.

Ms. Snyder opined that, overall, T.H.’s demands are “intense” and might make this gift
not charitable.

II. Discussion Problem: Donor Earmarking

Ms. Ward discussed this second hypothetical.

Pinky Dohner would like to make a gift to Bayview Medical Center to support research
into the prevention and treatment of conjunctivitis. Pinky’s lawyer sends the Center a gift
agreement, which describes the donation as a current use gift of $5 million dollars ($1
million/year for 5 years). The gift agreement states: The parties agree that the gift will
be used to support research overseen by Dr. Frank Seymour at the Conjunctivitis
Laboratory at Bayview Medical Center. As Director of the Conjunctivitis Laboratory, Dr.
Seymour shall direct, in his sole discretion, how the gift will be used to support his
research. Does the wording of the gift agreement raise questions about the deductibility
of Pinky’s proposed gift? Why? How could the agreement be revised to better protect
Pinky’s charitable contribution deduction?

Ms. Ward summarized that this discussion problem had two considerations: first, the
deduction to Pinky, and second, that Bayview wants to protect its independence.
Ms. Ward noted the importance of dominion and control for purposes of the charitable
gift. She added that if the doctor leaves or changes his medical focus, Pinky’s restriction
defeats the charitable purpose. Ms. Ward noted that the gift must be made to a tax-
exempt organization and not an individual. She opined that this particular restriction on
the use of the gift is too restrictive. Ms. Ward noted that the IRS has ruled on this issue,
treating a gift as being to the faculty member as opposed to the exempt organization (she
did not provide the citation).

Ms. Ward indicated that because this hypothetical illustrates a situation involving a
current use gift. She opined that the gift agreement provision is poorly drafted. She
noted that if the donor is a private foundation, the analysis changes based on the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
106
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Regulations and their discussion on earmarked grants (Ms. Ward referred to these
particular Regulations as the -5 Regulations). Ms. Ward noted that although the private
foundation can be involved in selecting the researcher that can use the funds, the Center
would have to have the ultimate say.

III. Discussion Problem: Gift in Exchange for Naming Rights

Mr. Rothschild discussed this third hypothetical.

Bobby Bitcoin was the CEO and major shareholder of LockR, a hugely successful
cryptocurrency business. After going public in 2012, Bobby Bitcoin’s stock was worth
over $500 million. Soon thereafter, Bobby was approached by Carnegie Mellon
University, where Bobby attended college for a couple of semesters, regarding a major
naming opportunity. In exchange for a present gift of $10 million, the University would
raise an additional $10 million in matching funds to construct a building to house its
cyber-security program. The building would be named in Bobby’s honor in recognition
of his business successes and significant lead gift. Bobby was concerned with the
University’s ability to raise the matching funds, so when he made his $10 million gift in
2012, it was conditioned on the University successfully raising the matching funds within
three years of Bobby’s gift.

Is Bobby entitled to an income tax charitable deduction for his gift in 2012? Being a
serial entrepreneur, Bobby started a new cryptocurrency business in 2018, the same year
that the Bobby Bitcoin Building opened for classes on Carnegie Mellon’s campus.
Unfortunately, the new business ran into some headwinds, and even after two successful
capital raises, ultimately shut its doors in December – leaving dozens of stock and
bondholders with worthless securities. Bobby has been sued by a number of disgruntled
investors for “cooking the books” and is about to plead guilty to criminal securities fraud
violations in exchange for a reduced prison sentence.

The Board of Overseers and President of Carnegie Mellon have determined that Bobby’s
name on a prominent campus building is damaging to the school’s reputation and notified
Bobby that the University intends to remove his name from the building. Can the
University do so?

Mr. Rothschild highlighted that the problem is the condition of raising an additional $10
million. He indicated that Revenue Ruling 79-249 illustrates a similar situation to this
hypothetical (the money is returned to the donor if the additional money is not raised).
He noted that under the facts of this hypothetical, the donor might have a better option in
gifting to a donor advised fund or community foundation.

Mr. Rothschild indicated that if the charitable gift agreement made Bobby aware of the
University’s policies, or it could be proven that the University policies were otherwise
provided to Bobby, the university could take Bobby’s name off the building and keep his
money (so long as Bobby’s actions rose to a certain threshold where it could be proven
that his actions damaged the school’s reputation). Mr. Rothschild stressed the use of

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
107
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

naming policies. He discussed the situation that arose with the use of the term
“Confederate” and a dormitory at Vanderbilt University (he indicated that the name was
removed after a donor donated funds to Vanderbilt University that were then paid to
remove the name). He highlighted this example for the premise that a reasonable policy
should be put in place to get rid of a “bad” name and keep the donated money. He noted
many of the gift agreements he sees do not discuss buildings that outlast their useful life:
can the naming rights be rebid?

IV. Discussion Problem: Donor Requires Charity to Retain Specific Contributed

Asset

Ms. Snyder discussed this fourth hypothetical.

Bud Entrepreneur has formed a company that is just getting off the ground. It is his third
start-up. The first one was not successful but the second one was and he had a substantial
profit from its sale, which he is using to fund this third company.

He is approached by the Cure Cancer ASAP Charity (CCAC) for a gift to support their
efforts to find a cure for cancer. Bud has never given to CCAC before and has no
relatives or close friends that have had cancer, but is sympathetic to their general cause.
Bud proposes to give CCAC an interest in his new company. It is not worth much now
and will not be marketable for some years so his proposal is that CCAC agree to retain it
for some time.

Bud first proposed that CCAC retain the interest for at least 3 years. Should CCAC agree
to this? CCAC declines to retain the interest for 3 years so Bud next proposes that CCAC
retain the interest until there is an initial public offering. Should CCAC agree to this?
Ms. Snyder discussed Form 8283 (for the donor to report noncash charitable
contributions when the amount of their deduction for all noncash gifts is more than $500)
and Form 8282 (for the donee charitable organization to report information to the IRS
and donors about dispositions of certain charitable deduction property made within three
years after the donor contributed the property). She indicated that if the values differ
between these two forms for contributed property, the donor would have an audit in his or
her future.

(A member of the audience later questioned whether Bud could amend his Form 8283,
and Ms. Snyder indicated that the answer depends on whether the donor is under audit.
Ms. Ward noted that this may raise an alarm. Mr. Rothschild noted that sometimes the
issue that arises between the two forms stems from a bad appraisal of an asset (leading to
one valuation on Form 8283) that the charity later must sell (leading to a disproportionate
reported amount on Form 8282).)

Ms. Snyder discussed the 3-year hold period. Ms. Snyder noted that from CCAC’s
perspective, it would want an asset that it can convert to cash to spend on its charitable
objective. She noted that if the interest does not have an initial public offering, then the
interest would be worthless in the hands of the charity. Ms. Snyder noted that based on
these facts and circumstances, it behooves CCAC to perform due diligence for purposes

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
108
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

of determining whether this is the right gift for them. She also suggested that CCAC
should get its own appraisal.

Ms. Snyder suggested that CCAC might be given a put right in the event of an initial
public offering. She also noted that this interest might be better donated to a donor
advised fund. Ms. Ward agreed that the put option would be a great idea and added that
the put could be drafted into the gift agreement.

Ms. Snyder noted that there is one community foundation that can be hired to be an agent
for these types of gifts (she hinted that this community foundation was located in Silicon
Valley). Ms. Ward noted that there are actually a few community foundations that do
this (not just the one in Silicon Valley).

V. Discussion Problem: Donor Wants Scholarship Restrictions, Particularly Race

and Gender

Ms. Snyder discussed this fifth hypothetical.

Honor Alumna has been very pleased with the way her career progressed. She gives a lot
of credit for her successful career to Any State Public University, where she received all
of her degrees. Honor wants to give back to them to show her appreciation by making a
gift for scholarships, which is a gift Any State would love to have because it has many
students who are eligible for financial assistance and it does not have enough funds to
accommodate scholarships for all.

In discussions, Honor tells Any State that she would like the recipients to be like her, that
is, African American females. She also wants to interview all of the candidates and
choose the recipients of her scholarship.

Can Any State accept a gift that requires recipients be African American females? Should
Any State accept the requirement that Honor choose the scholarship recipients? Can Any
State accept a gift that requires recipients be African American females? Should Any
State accept the requirement that Honor choose the scholarship recipients?

Ms. Snyder noted that charities want to receive their gifts and exercise complete control
over them. She discussed how Title IX interplays with this particular charitable gift. She
discussed the pool and match method. She added that the pool and match method may be
considered to permit the award of scholarships that would otherwise be viewed as race-
conscious, particularly for public educational institutions in states with statutes
prohibiting discrimination or preferential treatment based on race, though institutions
should be aware that the pool and match method has not been tested by the courts. Ms.
Snyder discussed that another alternative is that the donor could make another donation
to a charity external to the University (like a Foundation) that supports the University (a
community foundation or private foundation that can accept the conditions and
administer the funds), but added that the University might not like this (the University
would rather receive the funds, unrestricted).

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
109
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ms. Snyder indicated that an issue was the retention of inappropriate control. There was
a question from the audience where the person asking the question worked for a
university, was involved with a gift agreement, and used the term “preferences” in the
gift agreement. She asked if the panelists had noticed any trends with “preferences”. Ms.
Snyder indicated that in Michigan, no preferences may be granted and preferences are not
in the language used in Michigan. She noted that some charities in some states do not
administer “preferences” as “preferences” and instead use them as “requirements”. She
noted that this is a problem.

Another question asked was when an attorney general gets involved with charitable
donations and private foundations. Ms. Snyder noted that it depends on the states. She
indicated that the most egregious cases get investigated.

VI. Discussion Problem: Unfulfilled Pledges

Ms. Ward discussed this sixth hypothetical.

In 2014, Thurston Howell III made a pledge of $25 million to Gilligan University to fund
a new institute at the University, which has been named for him and his wife. The gift
agreement provided that the gift was to be paid in five installments over five years and
would be completed by December 31, 2018. In addition to the payment schedule, the gift
agreement, which was a fairly simple three-page document, provided that the Thurston
and Lovey Howell Institute would be “fully operational by 2018.” The agreement also
provided that the Institute would be part of the University and would be guided by an
“Institute Board of Directors” comprised of Thurston, the University Provost, the Chair
of the Department of Anthropology, and the Institute’s Director. The agreement does not
address what happens if the pledge is not fulfilled.

Thurston paid the first two installments in full and on time; the third payment was for $2
million and was paid in early 2017. Thurston has not made any payments since. He has
contacted the University to complain that (1) he views the person hired by the University
to serve as Institute Director as inexperienced and underqualified; (2) he disapproved of
the topic chosen for the Institute’s first conference held in 2017 (“Reconsidering Wealth
and Class in Isolated Island Communities”); (3) it is taking too long for the University to
appoint a full-time professor to the

Institute; and (4) the Institute Board of Directors does not meet regularly. Discussions
with Thurston about his pledge have been testy and he refuses to say if he will fulfill the
pledge. What can Thurston do to get the University to address his concerns about the
Institute? What can the University do to improve relations with Thurston and increase the
chances that the pledge will be fulfilled? What could the parties have done when
drafting the gift agreement to anticipate the sort of problems that have arisen?

Ms. Ward asked what can be done before things go South (“things are just bad . . . not
terrible”). She indicated that the issue is donor management. She noted that a University
official that Thurston likes should be sent to meet him. She opined that the University

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
110
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

needs to find a way to make the Howells feel included. She noted that a board of
directors should be elected to expeditiously hold a meeting to discuss Thurston’s
concerns. Ms. Ward opined that she sees lots of over promising combined with
inadequate gift agreements. She noted that from the University’s perspective, it should
repair matters with Thurston, in writing. She explained that the University needs to
create a paper trail in the event of a lawsuit by the Howells.

Ms. Ward noted that Thurston should also take notes of his discussion with the
University. Ms. Ward summarized that the main issue of this hypothetical is an
inadequate gift agreement. Ms. Ward indicated that she has standard terms that she uses
in discussing gift agreements. She discussed that some of the details become important,
even matters as small as the sizes of signs and other related things.

VII. Discussion Problem: Changes in Circumstances

Mr. Rothschild discussed this seventh hypothetical.

Edith DuPont Spencer was a nationally recognized cellist, having performed with both
the Boston and New York Symphonies. After her first husband’s death, Edith moved to
south Florida, where she met and married Skipper, a retired roadie from Jimmy Buffett’s
early bar band. The couple regularly attended performances of the University of
Miami’s student orchestra and were patrons of the Department’s annual black-tie
fundraiser. In 2015, the Spencers donated $1 million to the University to fund a chair of
cello instruction in its Department of Music. The gift agreement, signed by Edith and
Skipper as donors, provided that the funds would be held in perpetuity by the University
and income only would be used to support the Spencer Cello Chair.

Sadly, Edith passed away unexpectedly in 2017. Not long after her death, the new head
of Miami’s music department informed Skipper that there was declining demand for cello
instruction and asked if the Spencer Fund could be used instead to support the general
needs of the University’s music department. Can the restrictions on the use of the fund
be changed or eliminated post-gift to accomplish that request? What voice does Skipper
have in the conversation?

Conversations with Skipper about lifting the restrictions on the use of the Fund stalled so
the University initially decided that it would beef up its recruitment of classical music
students in an effort to increase demand for the cello program. In 2018, Skipper
remarried a young lounge singer, Trixie, who did not share Edith’s interest in classical
music. At Trixie’s prodding, Skipper approached the University recently about re-
designating the fund for a chair of jazz instruction as that is more in line with Trixie’s
musical interests. Since Skipper inherited a significant portion of Edith’s wealth
outright, the University is anxious to stay in his good graces, but Edith’s children from
her first marriage have made it clear they would oppose any new use of the Spencer gift.
What is the University to do – can it agree to a modification?

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
111
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Rothschild discussed the release of the spending and endowment restrictions post
gift. He indicated that the charity must make the request to do so, not the donor. Mr.
Rothschild discussed the release of the original mandate. He indicated that the donor
cannot unilaterally change the purpose of the gift. He added that if one of the parties to
the original gift is deceased, the co-donor cannot release all the funds. He added that
there is no clear answer as to whether the donor can release half of the money as a co-
donor. Mr. Rothschild noted that he would be hesitant to let this particular gift be altered.

VIII. Discussion Problem: Donors Who Demand Return of their Gifts

Ms. Ward discussed this eighth and final hypothetical.

Same facts as Discussion Problem #6, but it is now 2019 and discussions with Thurston
have broken down. Thurston’s lawyer has sent the University a letter detailing Thurston’s
grievances regarding the management and programming of the Thurston and Lovey
Howell Institute and alleging mismanagement of the fund supporting the Institute. The
letter demands return of the $12 million paid by Thurston so far. What are the
University’s options? What are Thurston’s options?

Ms. Ward asked whether the University is obligated to sue. She indicated that this is
based on the specific circumstances of the gift. She noted that if the University board
votes to sue, then the directors need to realize that their duty to University is to keep
assets. She indicated though that another issue is whether giving assets back to Thurston
and Lovey is a problem. Ms. Ward indicated that if the gift is given back without a
reasonable basis, such a gift back to a donor is improper. Ms. Ward is not aware of any
cases where the directors of a school are on the hook for a University not suing for
unpaid pledges. She gave the example of Duke University and its struggle with dropping
a claim to obtain funds that were pledged and not paid.

Ms. Ward noted that she is not a fan of giving back money unless the sum is too small to
justify fighting for. She noted that the State Attorney General should be contacted by the
institution as opposed to just returning funds. Ms. Ward indicated that the cost of
litigation is a factor; it may not make sense to sue the donor.

Ms. Ward noted that if money is return, the issue is the realization of income by the
donor. She noted that a 1099 might be owed to the donor for the return of the funds.

IX. Conclusion

Mr. Rothschild concluded by noting that circumstances change such as, with charitable
gifts to universities and colleges, professors leaving. He noted that you need to anticipate
change, especially in gift agreements so that the donor’s intent can be honored.

SPECIAL SESSION I-F:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
112
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

New Kids on the Block(chain): Planning with Bitcoin and

Cryptocurrency
Austin Bramwell, Abigail Rosen Earthman, Benetta P. Jenson, and Suzanne Brown
Walsh
Wednesday, January 16, 2019
ABA Reporter: Scott Hancock

Part I – Introduction

Ms. Jenson began the session by telling the story of the first Bitcoin transaction that
occurred in May 2010. The story goes that a user posted on a Bitcoin Internet forum that
the user would pay 10,000 Bitcoin for a couple of pizzas. Another member of the forum
agreed to the offer and had two large pizzas delivered in exchange for the 10,000 Bitcoin.
At that time, 10,000 Bitcoin was worth $41. As of the morning of January 16, it was
worth approximately $36.6 million.

The panel focused their remarks on various accepts of cryptocurrency including:

background, fiduciary issues, planning and drafting considerations, and taxation and
reporting.

Part II – Background

Ms. Earthman discussed the background of cryptocurrency. She highlighted the

distinctions between blockchain and Bitcoin and other cryptocurrencies. At a high level,
blockchain provides the means to record and store distributed ledger transactions. Bitcoin
was the first “use case” for blockchain technology. These concepts come from Satoshi
Nakamoto’s Bitcoin whitepaper. The genesis block, which was the first Bitcoin, was
mined in January 2009. Ms. Earthman noted that blockchain is not Bitcoin and Bitcoin is
not blockchain.

Blockchain has many potential uses including uses relating to the trust and estates
industry, elections, and maintenance of health care records.

The defining features of a blockchain include a decentralized, peer-to-peer network. In

addition, transactions on a blockchain are public. Everyone has access to the distributed
ledger, but the participants are still able maintain their privacy through the use of a
private key. Also, blockchain transactions are immutable and secure. A blockchain
transaction cannot be undone. The inability to undue blockchain transactions can result in
non-financial information that is added to the blockchain remaining.

The name blockchain is derived from the fact that pending transactions, once verified, are
grouped into blocks of data. Blocks are then linked sequentially by reference to the
immediately preceding block, creating an unbreakable chain.
Cryptocurrency is distinct from fiat currency, which is traditional currency. However, it
is possible to convert cryptocurrency into fiat currency. The current market cap for all
cryptocurrencies is approximately $122.2 billion.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
113
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Cryptocurrency may be obtained through a purchase on exchange, in exchange for goods

or services, or by mining using a computer. A transaction involving the exchange of
cryptocurrency for goods or services involves the following steps:

• Lisa, a participant on the Bitcoin blockchain with a Bitcoin wallet, sends her
blockchain address to Mark, another participant.
• Mark sends funds to Lisa’s address by broadcasting the transaction to the miners.
• Miners validate the transaction and add a new block to the blockchain.
• Miners aggregate, validate, and broadcast the blocks to each other.
• Everyone then has a record of the transaction and Lisa receives the funds.
Toward the end of the background review, Ms. Earthman noted that several states are
starting to consider the implications of blockchain from a legislative perspective and
payment perspective.

Part III – Fiduciary Issues

Ms. Walsh next led a discussion related to the challenges faced by fiduciaries in
accessing digital assets. These challenges include the practical challenge of accessing
digital assets in a timely manner or at all. These challenges also include that the use of
passwords and encryption by fiduciaries may violate federal and state privacy laws,
computer fraud and data protection laws, or terms of service agreements.

In general, computer fraud and abuse acts in the various jurisdictions prohibit the
unauthorized access of computer hardware and devices, and the data stored thereon. For a
fiduciary, this is not a problem for locally stored information under the Revised Uniform
Fiduciary Access to Digital Assets Act (Revised UFADAA).

Ms. Walsh noted that password sharing with others, including a named fiduciary, is a
commonly used lay method to provide needed access to online accounts and digital assets
held in them. However, this is not a solution to the issues related to fiduciary access,
because use by a fiduciary still may be against the law. In addition, a fiduciary’s use of a
password likely would violate a third-party’s terms of service agreement. One alternative
is to advise clients to use a commercial management system for storage of passwords, etc.
The Revised UFADAA helps to solve access problems for fiduciaries relating to digital
assets. Under the Revised UFADAA, to collect a digital asset, which includes
cryptocurrency, held by a third-party service provider, fiduciaries must first provide a
written request, a copy of the will, trust or power of attorney, and information linking the
account to the customer.
Ms. Walsh next reviewed different manners for storing private keys, which are used to
access cryptocurrency. Examples included a Trezor Bitcoin Wallet, hardware devices,
paper Bitcoin wallet (private keys printed out), and screen grabs from an App on

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
114
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

someone’s cellular telephone. In the case of a fiduciary, it would be important for the
fiduciary to be aware of the how an individual’s private key was stored.

Other practical concerns related to owning cryptocurrency include compliance by a

fiduciary with the Uniform Prudent Investor Act, the inability to hold cryptocurrency in
accounts similar to payable on death accounts or joint bank accounts, and the potential
need to quickly access cryptocurrency during an estate or trust administration to avoid a
substantial loss in value.

Part IV – Planning and Drafting

Ms. Jenson next discussed planning and drafting considerations. From a planning
perspective, attorneys should ask clients if the clients have cryptocurrency. If so,
attorneys should ask how and where a client’s private key is stored. Attorneys should
incorporate these questions into their client questionnaires.

In drafting wills and trusts, attorneys should consider specifically excluding

cryptocurrency, cryptocurrency wallets, and private keys from the definition of tangible
personal property used in such documents for disposition purposes. The panel felt that
clients would prefer that cryptocurrency be part of the residuary disposition as opposed to
part of the tangible personal property disposition.

Additionally, fiduciaries under wills, trusts, and powers of attorney should be granted the
power or authority to manage and handle digital assets, including cryptocurrency,
cryptocurrency wallets, and private keys.

In trusts, trustees should be granted the power to retain cryptocurrency in order to avoid
potential duty of diversification issues. Alternatively, a directed trust may be
implemented that has an investment advisor that deals with cryptocurrency or a holding
entity that owns the cryptocurrency may be implemented.

Part V – Taxation and Reporting

Mr. Bramwell next discussed taxation and reporting issues related to cryptocurrency. The
only formal tax guidance to date is Notice 2014-21. At a high level, Notice 2014-21
indicates the following:

• Cryptocurrency is property not currency.

• The receipt of cryptocurrency for goods or services is gross income.
o A taxpayer’s basis in cryptocurrency equals its fair market value on the
date of receipt by the taxpayer.
o Cryptocurrency received from mining is gross income on date of receipt.
• The exchange of cryptocurrency for cash or other property causes gain or loss.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
115
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

o The gain or loss may be capital if cryptocurrency is a capital asset. (Most

people treat cryptocurrency as a capital asset).
The fair market value of cryptocurrency may be needed in a number of circumstances
such as the exchange for goods or services, reporting transfers of cryptocurrency for gift
tax purposes, reporting cryptocurrency for estate tax purposes, or determining the value
of a charitable gift of cryptocurrency. According to Notice 2014-21, such fair market
value is to be based on exchange rates. What this means is not certain. However, an
appraisal by an appraisal firm may be possible.

Another issue is tracking the basis of cryptocurrency that is acquired at different times
and for different costs. It seems that the common practice is to track the basis for each
acquisition of cryptocurrency similar to the acquisition of stock in a corporation. It may
be possible to use Treasury Regulation Section 1.1012-1(c), which provides a first-in-
first-out default rule for stock.

Other issues include the realization and recognition of loss related to cryptocurrency,
whether taxable events occur with respect to concepts referred to as “hard fork” or “air
drops” among others, and gift

One of the planning considerations referenced with respect to cryptocurrency was the use
of GRATs.

Part VI – Conclusion

The session concluded with a brief question and answer session. One of the questions
related to the treatment of cryptocurrency as a security for securities law purposes. This is

SPECIAL SESSION II-B

Christopher R. Hoyt and Ruth M. Madrigal
Wednesday, January 16, 2019
ABA Reporter: Mary Elizabeth Anderson
Chris started the presentation with a brief run down the presentation agenda and some
history and statistics of gifting.

I. INTRODUCTION TO DONOR-ADVISED FUNDS

A donor-advised fund (DAF) is an account owned by a sponsoring public charity where

the donor (or a person appointed by the donor) can recommend grants and/or
investments. Chris explained that one of the benefits to the DAF is that it can gift
anonymously While there is some criticism directed towards DAF, recent studies show
that while private foundations have eight times more wealth than DAF but only two and
half times more distributions.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
116
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ruth explained that the definition of the fund is very important because different kinds of
funds have different reporting requirement and penalties associated with them, and
because the Form 990 is the main source of information, it is important to fully and
clearly disclosure all necessary information.

Next, the panelists walked through a series of fact patterns to illustrate the potential
issues and pitfalls of operating a DAF, including that a donor cannot maintain control
over the Fund and a DAF cannot make a payment of funds to an individual person.
Rather than making a DAF type gift to a specific charity, the donor should consider using
a community fund as an intermediary. The fund at the community foundation will make
distributions to the charity and then the charity can use the funds in any manner in
support of its purpose.

The panelists discussed the lack of guidance on the definition of control in the DAF.
Ruth opined that if guidance is issued, although there is no timeline on issuing
regulations, the definition of control will likely come from the supporting orgs laws.

II. PERMISSIBLE GRANTS

The panelists moved to a discussion on the issues of permissible grants. A DAF can make
contribution to any of the following: any public charity or private operating foundation
(except Type III supporting orgs); the sponsoring public charity; another DAF; and a
foreign charity or civic org but only if “expenditure responsibility” is assured. A DAF
cannot make grants to: a human being; a non-charitable purpose; an organization other
than a public charity without “expenditure responsibility”. If a DAF makes an
impermissible grant, then both the charity receiving the grant and the employee who
knew about the invalidating act could be subject to penalties. Chris also explained the
different private foundation self-dealing rules that apply to DAF which apply to DAF
differently than private foundations. What might be a prohibited self-dealing action to a
private foundation – sale of an asset at appraised fair market value to a disqualified
person, for example, might be permissive with a DAF.

III. NOTICE 2017-73

The presenters next discussed the guidance offered in Notice 2017-73. Community
Foundations have repeatedly asked for guidance on satisfying bifurcated grants and
charitable pledges. This notice addresses issues with “more than incidental benefits” and
contribution laundering.

A private foundation cannot pay a legally binding pledge of a disqualified person, but
following Notice 2017-73 a DAF can satisfy a donor’s pledge (whether binding or
nonbinding) if: (1) there is no reference to the pledge in the distribution; (2) the donor

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
117
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

does not receive benefit; and (3) the donor does not attempt to claim charitable deduction
on the distribution by the DAF.

Ruth cautions that this is not the Service taking the green light on pledges but more likely
a concession on the comments received about pledges.

Next the presenters discussed issues around bifurcated grants and the more than
incidental rule. The Service seems to think that attending a tabled event is a more than
incidental benefit to the donor who uses their fund to make a substantial contribution.
Under Notice 2017-73, if the donor cannot attend the event without the DAF
contribution, then this is a more than incidental benefit. Chris suggests that instead of
trying to issue one bifurcated contribution, the donor should pay the minimum table price
and the DAF should make the full contribution. In the end the donor will have technically
purchased two tables but the DAF could return its table.

The presenters moved to issues with contribution laundering. A donor establishing a new
charity that would otherwise be classified as a private foundation, makes a contribution to
his or her DAF instead of directly to the new charity. The DAF then makes the
contribution to the new charity so that the new charity is now receiving 100% public
support contributions and can qualify as a public charity rather than a private foundation.
If the transaction is solely for the purpose of avoiding the private foundation rules, then
tracing will apply and look through the DAF to the donors and aggregate all the
contributions. Anonymous gifts will be treated as being made from one person. Chris
opines that this new rule, while viewed as burdensome by many, will catch the few bad
actors that are abusing DAFs. Ruth is holding out to see if there is a burden on smaller
charities who may not have a budget to support tracing their contributions.
The panelists concluded their presentation with a compelling discussion on the facts that
DAF are real charities doing real charitable good works and the public criticism that they
are abuse vehicles for the wealthy does not appear to be in line with the donation and
giving statistics.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
118
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
119
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #7

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #7 continues our coverage of the Institute with reports on the late group of
Wednesday Special Sessions and the third Fundamentals program of the Institute. These
reports cover the sessions on post-mortem planning; qualified small business stock;
fiduciary cases; planning strategies for foreign assets; protecting client data; and
redefining the family.

Note that the report on Session II-B, covering Donor Advised Funds, was included in
Report #6.

FUNDAMENTALS PROGRAM 3
It Ain’t Over Till the Post-Mortem Planning Is Done
John T. Rogers, Jr. and Robert K. Kirkland
Wednesday, January 16, 2019
ABA Reporter: Scott Hancock

Part I – Introduction

Mr. Rogers started the session by reviewing some initial considerations. Post-mortem
planning includes determining and making certain tax elections, determining and making
certain non-tax elections or decisions, and implementing and executing a plan or
procedure for handling other administration tasks.

To start, attorneys must determine who the client is. For purposes of the session, the
assumption is that in almost all cases the client is a fiduciary, either an executor or
personal representative of an estate or trustee of a trust.

Next, attorneys must understand the nature and sophistication of the client such as
whether the client is an individual or a corporate fiduciary in order to provide the
appropriate form of representation.

Mr. Rogers noted that two components of the representation that are critical are
communication between the attorney and fiduciary and the determination of the record
keeping roles between the attorney and fiduciary.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
120
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Part II – Qualified Retirement Plan and IRA Beneficiary Issues

Mr. Kirkland next discussed certain qualified retirement plan and IRA issues related to
designated beneficiaries.

Certain tax deferral benefits are available for a spousal rollover of retirement benefits.
Even if an estate or trust is the named primary beneficiary of a retirement plan, it may
still be possible to obtain spousal rollover treatment through a private letter ruling. In
some recent private letter rulings where an estate or a trust was the designated beneficiary
of the IRA and the only beneficiary of the estate or trust was the surviving spouse, the
IRS granted spousal rollover treatment.

With respect to non-spouse beneficiaries, certain requirements must be met in order for
the beneficiaries to be designated beneficiaries for purposes of the qualified retirement
plan rules. For instance, individuals and certain trusts qualify as designated beneficiaries,
but estates, charities, and business entities do not qualify. Methods exist for removing
beneficiaries that are not designated beneficiaries. If such beneficiaries are removed prior
to September 30 of the year following the year of the taxpayer’s death, then such
beneficiaries are not considered in determining whether the beneficiaries are designated
beneficiaries.

Only certain trusts qualify for the deferral or stretch of qualified retirement plan or IRA
distributions. For example, a trust referred to a conduit trust qualifies for the stretch. If a
conduit trust is drafted and administered correctly, the trustee will collect the required
minimum distribution based on the trust beneficiary’s life expectancy and then the trustee
will immediately pay out such distribution to the trust beneficiary.

If a trust is not a conduit trust, then it is necessary to confirm that the trust otherwise
qualifies as designated beneficiary to allow for the stretch. To qualify, a trust must satisfy
five tests. The most difficult test to satisfy is that all the trust beneficiaries must be
“individuals”. Analysis of the “individual” test is particularly difficult when a charity is a
beneficiary of any kind. Some recent private letter rulings have provided additional
insights into when a charitable beneficiary may not cause an issue.

There have been rumblings regarding doing away with the stretch in recent years. It
seems that current legislation is pending that would eliminate the stretch for most non-
spouse beneficiaries.

Part III – Checklists

Mr. Rogers next discussed the benefits of using checklists with respect to post-mortem
planning and administration. Sample checklists are readily available on the Internet and

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
121
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

in other resources from state bar associations, state practice guides, and other
practitioners.

Suggested elements for a post-mortem planning and administration checklist include the
following:

• Review of the decedent’s estate planning documents and related documents.

o The review should be in the context of the client represented and the other
people that may be affected by the documents.
o The review should include the identification of problems or issues that
may arise in attempting to comply with the terms of the documents.
• Inventory and appraisement of assets.
• Notifications related to the estate or trust that may be required under state law.
• Determination and identification of potential tax elections to be made.
• Investment decisions related to trust property.
• Potential modifications to the trust and methods for obtaining such modifications.
• Determination or identification of critical dates such as:
o Date of death of the decedent.
o Administration deadlines for notifications and filings under federal, state,
and local law.
 Court deadline for inventory and appraisement of assets.
 Other court filing deadlines.
 Deadlines for providing needed notifications.
 Deadlines for making tax elections.
 Deadlines for other tax filings.
o Dates to provide additional communication to the client regarding
administration progress and requirements.
• Estate tax return issues and items.
Other helpful resources for a fiduciary may include the ACTEC podcasts, which are
available at https://actecfoundation.org/blog/podcasts/ and the article “What It Means to
Be a Trustee: A Guide for Clients”, which is available at
https://www.actec.org/assets/1/6/ACTEC_What__It_Means_to_be_a_Trustee.pdf.

Part IV – Other Issues

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
122
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Kirkland also discussed issues related to digital assets and post-mortem trust
modifications.

Digital Assets

It is important to review a decedent’s digital presence in addition to the normal

administration items of checking mail, paying bills, closing accounts, etc. Digital assets
may have monetary value and sentimental value. Digital assets may include unpublished
manuscripts saved electronically, blogs, Internet domain names, etc.
In administering digital assets, fiduciaries need to be advised as to the laws governing a
fiduciary’s authority to deal with digital assets such as the Revised Uniform Fiduciary
Access to Digital Assets Act and the various computer fraud and abuse acts and privacy
laws that may limit a fiduciary’s ability to legally access digital assets. In some instances,
it may be better for a fiduciary to access the digital assets to avoid claims by beneficiaries
against the fiduciary notwithstanding the potential violations under the various computer
fraud and abuse acts and privacy laws for accessing such assets.

Post-Mortem Trust Modifications

Post-mortem trust modifications may involve trusts created by the decedent or trusts
created for the benefit of a decedent. A trust modification may occur through a
nonjudicial settlement agreement, a judicial modification, decanting into a new trust, or a
termination of an uneconomic trust. The objectives of a post-mortem trust modification
may include one or more of the following:

• Updating the dispositive provisions,

• Changing the trustee,
• Correcting errors in the trust instrument,
• Achieving a settlor’s tax objectives,
• Enhancing asset protection, or
• Providing for other changes because of unanticipated circumstances that have
happened.
Part V – Conclusion

The session concluded with a brief discussion by Mr. Rogers of the funding of sub-trusts
followed by a question and answer session. One question related to a fiduciary’s
obligation to communicate with designated beneficiaries of a qualified retirement plan or
IRA when such designated beneficiaries were not otherwise beneficiaries of an estate or
trust. Mr. Rogers and Mr. Kirkland indicated that a legal obligation probably did not
exist, but that the fiduciary may need to communicate with such designated beneficiaries
to obtain information for estate tax return reporting purposes.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
123
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

SPECIAL SESSION II-A

QSBS: The Quest for Quantum Exclusions (Queries, Qualms, and
Qualifications):
Paul S. Lee, L. Joseph Comeau, Julie Miraglia Kwon, and Syida C. Long
Wednesday Afternoon, January 16, 2019
ABA Reporter: D. W. Craig Dreyer

Qualified Small Business Stock: The Next Big Bang?

This was a follow up to the general session with Paul Lee.

Defining Transfers by Gift, at Death, and Other Transfers (or Non-Transfers)

Defining transfers by gift, at death, and other transfers (or non-transfers) are not what we as
estate planners would normally consider common sense. Section 1202 does not define what
a transfer by gift or death is and since there are very few permitted QSBS transfers, it is
important we understand how these terms are used.

Transfers by Gift. Since there is no definition in section 1202, there is little consensus as to
what a transfer is. They noted that terminology for Gift, Estate and GST tax purposes is
generally not applicable for income tax purposes. The two chapters have conceptually
different goals. There is no reason to presume subchapter J applies to the income tax side.
The following principles show us what constitutes a gift for section 1202: 1) a gift is a
transfer recognized for income tax purposes, but is gratuitous; 2) after the gift, a separate
taxpayer is treated as the owner of the property; and 3) the transferor’s basis is determined
under section 1015. In income tax land, a transfer to a grantor trust is not a gift since the
same taxpayer holds it after the transfer.

Transfers at Death. What constitutes a transfer at death for section 1202? Section 1014 of the
code is the most obvious example for property acquired from or passed from a decedent.
Section 1014 is often referred to short hand by saying that if property is included in the gross
estate it gets a step up in basis, but these are not the only items that qualify. Transfers are a
broader category than simple bequests and also include powers of appointment for property
held in trust.

As planners we must continually remember that transfer tax rules are not determinative for
income tax purposes. The panel noted some examples of completed transfers. A DING
(Delaware Incomplete non-grantor) trust is actually a completed gift for income tax purposes
since it is a gift to a non-grantor trust. Furthermore, transfers to a GRAT, or any grantor
trust, or even sale to an IDGT would not be completed transfers under section 1202. The
panel also emphasized that for section 1202 purposes, when a non-grantor trust becomes a
grantor trust this is ignored for income tax purposes. However, a transfer from a grantor trust
to non-grantor trust is a taxable gift for income tax purposes. This will allow some planning
opportunities with toggling grantor trust status.

Entity-Related Transfers. A distribution from partnership to a partner is a permissible QSBS

transfer under section 1202. However, contributions to a passthrough entity generally cause

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
124
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the loss of QSBS status. These rules are tricky since the steps you take are very important to
preserving QSBS status. Notwithstanding losing QSBS status for a transfer to a passthrough
entity, a contribution to wholly owned LLC is allowed since it is ignored for income tax
purposes, but it also accomplishes nothing for section 1202 purposes. If the same single
member LLC becomes a partnership with an additional partner, you would lose QSBS status.
If a GRAT terminates and distributes to two beneficiaries, this would terminate QSBS status.
The panel noted that structuring transactions especially matter when dealing with section
1202. The panel noted they are not sure if gifting a partnership interest holding QSBS stock
works since there is conflicting authority, but liquidating the partnership and distributing the
stock to the partners, who then can gift the QSBS stock should work.

Order in Which to Sell QSBS Stock

The way section 1202 is written it says every taxable year you can exclude QSBS proceeds
the greater of $10 million less the amount taken in prior years or 10 times the aggregate tax
basis of whatever you sold. Here you can get both if you take them in the proper order. This
technique requires a multiple year planning strategy. You can’t take both in single year, but
you can get both over a multiple year plan. The panel noted that when selling QSBS stock,
you should first sell 100% exempt stock, before selling the 75% stock and the 50% stock. It
is also important to use the $10 million QSBS exemption before using the 10 times basis
number to maximize your benefits. Also, the first sale should be the founder shares since
presumably they have near zero basis. The panel noted that you should also sell non-QSBS
shares before selling QSBS shares.

Stacking

Multiplying the $10 million per taxpayer limitation with a gift transfer. Make transfers to
multiple irrevocable non-grantor trusts, that can later become grantor trusts to multiply the
exclusion. They noted that it is trickier to make sure a trust is going to be non-grantor trust
than many people think.

The panel then discussed the multiple trust rule. Look at section 643(f) proposed regs with
anti-abuse regulations showing multiple trusts will be aggregated and collapsed if they have
similar beneficiaries. Creating separate trusts for kids, siblings and your siblings’ children
should work. There is no bright line or criteria but they suggest not getting too cute.
Assignment of Income. The panel moved on to discuss the general doctrine of assignment of
income issues with section 1202. Essentially, they discussed how the general assignment of
income issues we have seen in the past are still in play when structuring these transactions for
section 1202.

Packing

Packing (maximizing) the 10 times basis limitation with contributions of property. Basis
includes fair market value of property contributed in return for stock. Using section 351
transfers, basis can be increased with contributions of high basis property. Intellectual
property contributed to C-Corporations can allow this. The panel noted that the exercise of an
option can become a silver lining for sale of QSBS stock, since exercising the option can
create basis in the same year of sale.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
125
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Section 1202 says married individuals filing separate returns only get $5 million each rather
than the $10 million QSBS exemption, but it also addresses married couples filing jointly and
does not limit the exemption. There is an argument that every taxpayer should get a separate
exclusion, so if married you may get full exclusion twice. One option is to file the return and
then file a protective claim for refund. Currently, the consensus is that married people filing
separately can only get one 10 million exclusion, but there is an argument they should get
two $10 million exemptions.

QSBS with a Pre-Existing Business

Converting a pre-existing partnership to a c-corporation can provide QSBS status. An S-Corp

can make investment in a qualified small business, but you cannot invest in an S-Corp and
make it become a C-Corp. QSBS must be C-corporation at time stock was issued. Stock
contributed to C-crop would work if it becomes subsidiary of s-corp. The panel went on to
discuss the tracking rules that may apply for holding periods and the best ways to structure
these transactions.

Inadvertently Losing QSBS Status

People have inadvertently lost QSBS status. The first problem is redemptions, which have
special rules to prevent abuse and loss of QSBS status. There are exceptions for death and
termination of services. One other common problem is hedging, since if you go public and
you hedge the QSBS stock within 5 years, you lose QSBS status.

QSBS and Carried Interest

The panel also discussed the current debate on whether or not carried interest can be QSBS.
The issue arises in a partnership with a carried interest portion which may hold an underling
QSBS business.

Reporting QSBS Installment Sales

Installment sales and QSBS. Instructions for reporting section 1202 installment sales say you
must prorate exclusion, but the panel believes this in an incorrect reading if you read the
statute. The panel also emphasized the importance of having the person signing the tax
return in on the structuring of the transaction to ensure everyone finds the transaction
acceptable.

Session II-B – See Notes

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
126
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

SPECIAL SESSION II-C

Review of the Past Year’s Significant, Curious, or Downright
Fascinating Fiduciary Cases (at least it seems to me)
Dana F. Fitzsimons, Jr.
Wednesday, January 16, 2019
ABA Reporter: Michelle Mieras

Mr. Fitzsimons took the audience on a humorous whirlwind review of numerous fiduciary
cases decided in 2018. He called such litigation “luxury-priced therapy for rich families,”
and noted that we would learn our lessons through the suffering of others. By this reporter’s
count, Mr. Fitzsimons discussed more than 75 cases covering a wide variety of topics during
this 90-minute session, a selection of which are covered in this report.

I. POWER OF ATTORNEY AND DISABILITY PLANNING CASES

Mr. Fitzsimons first noted that the power of attorney is a useful planning tool, and also the
most effective tool for burglary since the crowbar.

• Knox v. Vanguard Group, Inc. (Mass.): Institution had processes in place to thwart
potential fraud issues, including a requirement that clients use the institution’s power
of attorney form or otherwise the agent must certify that the power of attorney is still
valid, and application of a single state’s laws to the contract. The client must agree to
those terms in order to establish an account. Client’s agent (an attorney) tried to use
his own form, refused to certify its validity, and made things worse by (among other
things) signing the principal’s name on other account opening documents without
acknowledging he was the agent, naming himself as beneficiary, and attempting to
make unauthorized changes to the firm’s form. The agent sued the institution on
numerous grounds, all of which were dismissed.

• Colburn v. Cooper (Ohio): Addressed standing to review the acts of an agent under a
power of attorney, including “presumptive heirs.” The agent’s attempt to thwart his
sister’s standing as an heir to challenge the agent’s action as mother’s agent, based on
creative interpretations of who is a “presumptive heir” was rejected by the court.
Furthermore, the principal’s death did not render the action moot as the sister
continued to be an interested party in the estate.

• In re Guardianship of Robbins (Ind.): Court cannot refuse to fund a special needs

trust based on the judge’s personal objection to government funding for disabled
persons.
II. TRUST TAXATION CASES

Mr. Fitzsimons noted that it has been a good run for pro-taxpayer decisions over the last
several years.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
127
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• Hansjoerg Wyss 2004 Descendant’s Trust (Pa. Board of Finance): The review board
applied McNeil v. Commonwealth to reject taxing the trust based on the historical
domicile of the settlor. The presence of two of the four trustees in the state did not
affect the decision because of tax department regulations stating that the residence of
the fiduciary is immaterial.

• Paula Trust v. California Franchise Tax Board: The taxpayer won on appeal, and
California had to refund 50% of the California taxes paid by the trust on the sale of
assets because only one of the two co-trustees was in state and the taxes therefore had
to be apportioned.

• Fielding v. Commissioner of Revenue (Minn. Tax Court): The trust had out of state
trustee, records, and beneficiaries. Minnesota attempted to tax the trust based on the
settlor’s historic domicile in Minnesota. This was found to be in violation of the due
process clauses of the state and federal constitutions.

• Kimberley Rice Kaestner 1992 Family Trust v. North Carolina Department of

Revenue: Taxation of discretionary trust based on presence of beneficiaries violated
constitutional due process and commerce clauses (on cert. to U.S. Supreme Court).

• South Dakota v. Wayfair, Inc. (U.S. Sup. Ct.): A state can apply state sales tax on a
business that has no presence within the state so long as there is a sufficient nexus
with the state. This is not a trust case, but of concern to trust attorneys because
Wayfair overrules Quill Corp v. North Dakota, which has been cited in support of the
trust tax cases. Mr. Fitzsimons noted that Quill is different than Wayfair, and that
there are additional concerns around double taxation in the trust cases.

• Comptroller of the Treasury v. Taylor (Md.): A QTIP election was made (on a timely
filed estate tax return) for a trust established for wife upon husband’s death while
living in Michigan. Wife subsequently moved to Maryland. At her death, Maryland
attempted to tax the trust because the QTIP election was not made on a Maryland
estate tax return. A strict reading of Maryland’s statute (which must be construed
against the government) led to the taxation being overturned by the Maryland Court
of Special Appeals. A consistent decision was reached in a QTIP case in New York
(Estate of Evelyn Seiden).

• Estate of Churnowitz (N.J.): This exhibits the divergence of state and federal tax
rules. New Jersey still has the clawback rule (referred to as Sec. 2035 classic by Mr.
Fitzsimons) for gifts made within three years of death. Here, the estate failed to rebut
the presumption of inclusion for state inheritance tax. The court gave significant
weight to the decedent’s declining health at the time of the transfers, and did not
address the fact that it was December of 2012 when the increased gift and estate tax
exemptions were set to be repealed. The court found that while a gift made in an
emergency situation can be an exception, this type of tax code changes is not the kind
of emergency that qualifies as such.
III. SITUS AND GOVERNING LAW CASES:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
128
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• In re JP Morgan Chase Bank, N.A. (Tex.): A 1934 trust created by the founder of JC
Penney for the benefit of his daughter and her descendants included a provision that
required the trustee only to account to New York courts. New York refused to
enforce this provision, allowing the beneficiaries to sue in Texas. The Texas court of
appeals reversed and granted mandamus relief, because the failure to give effect to
the forum clause enabled forum shopping and wasted resources. Notably, at least one
beneficiary lived in New York City.

• In re Doll Trust (Mich.): The terms of the trust allowed the trustee to move the trust’s
situs. The trustee moved the trust situs from Michigan to Florida and gave notice
even though they were not required to. One beneficiary sued, but the Michigan court
dismissed for lack of jurisdiction in light of the situs change. The court of appeals
affirmed, since Florida could hear the case.

• In re Will of David F. King v. King (Ore.): A trust included provisions stating that
Nevada law governed, but also included Minnesota fiduciary powers. The court
found that the choice of law provision controlled, and applied Nevada law to the case
rather than the Minnesota fiduciary power laws, resulting in a surcharge against the
trustee for loans to herself, her family and her business, which were prohibited under
Nevada law.
IV. TRUST ASSET AND INVESTMENT CASES:

• Lund v. Lund (Minn.): Sister inherited part of a family business in trust; brother was
co-trustee as well as CEO and president of the family business. Sister sued to compel
buyout of her share, and litigation of the valuation ensued. The court found both
sides’ valuations self-serving and overzealous, and essentially split the baby. The
court refused to apply any discount for lack of marketability or control in light of the
strength of the company, dividends, and capable management. Sister wanted brother
removed as trustee. The court found that this situation was the type of change of
circumstances that justified application of the no-fault removal provisions, and
removed brother as trustee.

• Menhennick v. Menhennick (Mich.): This case shows the importance of careful

drafting around options to purchase assets. Dad’s trust provided that at the time of
distribution of the trust assets, any child working for Harvey Oil could purchase
Harvey Oil stock at the estate tax value, but this right expired six months after the
IRS approves the estate tax return. The estate was not required to file an estate tax
return. The court found that the time never ran, and son was able to buy the stock at
the low price.

• In re Trust of Ray D. Post (N.J.): The terms of the trust required the trustee to retain
certain stock, and it did so for over 25 years. Upon acquisition of trustee bank, the
issue was revisited. The bank wanted to diversify, and retained outside counsel who
advised (more than once) against unilateral diversification. The trustee disregarded
this advice, and sold the stock without consulting with the beneficiaries (or even
notifying the beneficiaries) or obtaining court approval. Compounding the issue was

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
129
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the trustee’s refusal to provide relevant information, including copies of the trust
agreement, to the beneficiaries. The bank was surcharged, and the appellate court
affirmed, noting that the prudent investor act’s diversification provisions can be
overridden by the settlor’s directions. This is a good reminder to corporate trustees to
ensure that appropriate pre-acceptance review processes are in place to identify traps
in trusts, including those lurking in the boilerplate language.

• Matter of Wellington Trusts (N.Y.): This case was discussed in 2016, and now we
have the appellate decision. The beneficiary sued the co-trustees for failing to
diversify investments. Although the individual co-trustee was let off easy by the
beneficiary, they pursued the bank co-trustee. However, the terms of the trust
allowed the individual trustee (who refused to diversity) to remove and replace the
corporate trustee, making the individual trustee to dominant trustee, and also waived
the diversification requirement. Accordingly, the dismissal of the claims against the
bank was upheld.

• In re Trust of Jones (Minn.): A trustee was not required to follow the directions of
the beneficiary to invest purely in silver, where the beneficiary was certain that the
collapse of the market was imminent.
V. ACCESS TO TRUST INFORMATION; ACCOUNTINGS:

• Millstein v. Millstein (Ohio): This was a case of first impression regarding the
grantor’s state law rights to information regarding a trust qualifying as a grantor trust
for federal tax purposes. The grantor argued that he was entitled to a full accounting
and wanted to compel the trustee to pay the income taxes due to grantor as a result of
the trust’s grantor trust status. The court found that the settlor was only entitled to the
grantor trust tax letter, not a full accounting. Furthermore, the court dismissed the
grantor’s request to compel the trustee to reimburse the grantor for taxes, as the trust
did not even include provisions authorizing reimbursement of taxes. Mr. Fitzsimons
noted that practitioners on the ACTEC listserve are kicking around the question of
whether the grantor might have standing to reform a trust to carry out the grantor’s
tax objectives under the UTC if the only grantor power is a swap power (i.e. can the
grantor seek reformation to waive the swap power and terminate grantor trust status).
A better approach is to simply include in the trust a provision giving the grantor a
right to relinquish the swap power.

• Patrick v. BOKF, N.A. (Kan.): Individual trustee was removed and bank stepped in
as trustee. The individual trustee continued to trade trust assets, hid assets from the
bank trustee, and then sued the bank trustee for not wrapping up trust administration
in a timely manner. The bank trustee then sued the individual for tortious
interference with trust administration. The appellate court reversed the trial court’s
finding in favor of the bank, noting that the correct action would have been a
surcharge action against the individual trustee. The court punished the bank for
pursing tortious interference by making the bank bear its own attorneys’ fees.
VI. UNDUE INFLUENCE:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
130
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• In re Estate of Danford (Tex.): Where a durable power of attorney was signed the
same day as the principal’s will, the agency created by the durable power of attorney
gave rise to a presumption that the will was a product of undue influence by the
agent, even though the agent had never accepted or acted under the power of attorney.
VII. PROBATE/ADMINISTRATION:

• Passarelli v. Dalpe (Mich.): Where a person said they would never sign a will, didn’t
read the draft, and did not actually sign the will, the unsigned draft will was not
admitted to probate.
VIII. ACCESS TO TRUST ASSETS:

• Horgan v. Cosden (Fla.): The court rejected the commutation of a charitable trust
even though the beneficiary and the charity agreed to do so, but the trustee objected.
The son was a spendthrift and complained about the expenses of trust administration.
The court declined to terminate as it violated the intent of the trust, noting that trustee
fees and market risk are a normal part of trust administration.

• In re Trust of Shire (Neb.): The beneficiaries attempted to use UTC Section 411,
requiring unanimous consent, to modify a trust to increase distributions to the current
beneficiary. A guardian ad litem was appointed to represent unknown and
undiscovered beneficiaries, who objected. Consent was not, therefore, unanimous.
The court also noted that unanimous consent required affirmative consent, not simply
a lack of objection.
IX. BREACH OF FIDUCIARY DUTIES:

• Peterson v. Peterson (Ga.): Where the trust contained conflicting provisions stating
that the primary beneficiary was the wife, but that children also be supported, the
court did not have enough evidence to dismiss an action brought by the children
asserting that the trustee breached its duties by putting the wife’s needs first.

• Kliman v. Mutual Wealth Management Group (Ind.): The court summed up this case
in its statement, “You cannot make initial distribution requests by suing the trustee.”
The beneficiary had attempted to sue the trustee for denying discretionary
distributions that were not requested or incurred, that were actually paid, or for post-
death expenses while still alive.

• In re Weitzel Trusts (Minn.): The trustee was sued for failing to make distributions
from a trust to which settlors stopped contributing, failing to compel the settlors to
make additional contributions to the trust, failure to provide income to the
beneficiaries, intentional infliction of emotional distress on the beneficiaries, and
improperly allowing settlors to retain the power to exclude beneficiaries from having
Crummey withdrawal rights against contributions (not to mention allegations of
RICO racketeering for following the trust’s terms). The court of appeals affirmed the
trial court’s denial of all claims.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
131
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

SPECIAL SESSION 2-D

Lose the Fear of the Foreign - Practical Planning Strategies for Foreign
Assets
Presenters: Michelle Graham, Dora Clarke, and Dina Kapur Sanna
Wednesday January 16, 2019
ABA Reporter: Edwin P. Morrow III

Michelle started with a short recap of her first session (see summary of Wednesday’s GS
- Prepare for Global Wealth: Demystifying Planning for U.S. Persons with Foreign
Assets), starting with a broad summary of “civil law” system in most of the world
contrasted with our common law in the US.

1. Differences between civil law and common law

Major differences between the two systems for estate planners are: civil law generally
does not recognize the concept of trust or the concept of personal representative/executor,
civil law often has forced heirship and matrimonial law similar to community property.
There are also major differences among the various countries in taxation on death – there
may be an estate tax or inheritance tax or none at all. These differences affect how assets
should be held, whether multiple wills are recommended, and what reporting obligations
apply.

2. Hypothetical of death of US resident who owned real estate in Italy.

European Union (EU) succession law has default rule to apply law of owner’s place of
habitual residence and may make an election to use law of nationality as well. In the
example, California law would apply to succession of title of the Italian real estate. Italy
has signed onto Hague Convention, which will recognize a trust even in a civil law
country that does not ordinarily recognize trusts. Even if the Hague convention is
followed, however, it’s often recommended not to use trusts because of lack of
familiarity.

3. One will to control worldwide property or one for each country?

The panelists usually recommend a separate will for assets sitused in a different country.
One will is not necessarily less expensive than two when factoring in post-mortem
administration. But you need one quarterback and communication between advisors.
Pros/cons: one will may be cheaper at first, but could cause problems later; need for
translation and affidavits; more difficult duties for US executor, and there is a risk of
inadvertent revocation with multiple wills.

4. Buying property in the European Union: Hypothetical US Citizen with real estate
in France

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
132
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

You can choose your own (US) law to apply to succession, but it could be preferable not
to, often because the local situs law may provide exactly what is desired anyway.
Hypothetical: US citizen married with 2 minor children buys property in France. Under
local law in US, French law would apply to real estate in France, but this may be a
problem in that forced heirship causes children to have statutory share, which prevents
marital deduction. She could have made an election in her will to have US law apply to
the property’s succession, which would have enabled property to pass 100% to husband
without forced heirship. The foreign equivalent of a qualified disclaimer or waiver may
be possible. Under French law, there is no estate tax over assets passing to spouse (but
they may not recognize concepts such as marital trusts/QDOTs). Try to avoid passing via
pourover will to a trust as beneficiary in a will in France due to registration requirements
and wealth tax.

5. Ownership of Assets Abroad – Outright v. Through Entity

Sometimes it makes sense to own property in foreign entity similar to an LLC, which
may help avoid foreign estate/inheritance taxes as well as forced heirship rules. Many
countries may not “disregard” a single member LLC for tax purposes as in the US
however. Be sure to advise on proper US foreign information reporting if foreign entity
used, e.g. Forms 5471, 3520-A, 8858, 8865, 8938 FBAR.

6. Hypothetical #3: US citizen purchasing property in United Kingdom.

The UK has dramatically curtailed many trust advantages and trusts can often be unfairly
penalized for inheritance tax purposes. Revocable trusts in the UK can incur immediate
inheritance taxes plus new charges every 10 years and it can be very costly mistake to
fund UK property in a revocable trust. Also, it is potentially very costly for UK residents
establishing revocable trusts even for US property even though there is an argument that
it should not trigger UK inheritance tax because it is a “bare” (similar to nominee) trust.
Avoid this uncertainty.

It is recommended that US citizens avoid utilizing a company to own UK real estate.

Single member LLCs may often be seen by other countries as corporations subject to
various taxes. Better for US citizens to own UK real estate in their own names and have
a separate will for the UK property.

7. Federal transfer tax on Foreign Property and Effect of Treaties

IRC Section 2014 does offer a credit in some cases for foreign death taxes paid. There
are 17 estate and gift tax treaties (e.g. with Canada, France, UK, Germany) that should be
consulted. See Form 8833. Treaties can affect how domicile is determined. If US
citizen is domiciled abroad, two death tax systems may be implicated absent treaty.
Concept of domicile is often very important even for US citizens because of treaties.

8. Avoiding US Trusts inadvertently being considered foreign trusts

We can inadvertently cause a domestic trust to be a foreign trust. There are two tests that
must be met to avoid foreign trust classification: Section 7701(a)(30)(E) defines the term
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
133
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

“United States person” to include any trust if: A court within the United States is able to
exercise “primary supervision” over the administration of the trust, and one or more
United States persons have the authority to control all “substantial decisions” of the trust.
Naming non-citizen trustees can be an issue. Once you have foreign trust, it opens up a
huge compliance/reporting burden even if it’s a revocable grantor trust. Section 684
moving from a domestic to a foreign trust can trigger income tax but IRC Section 679
states that if there is potential for a US beneficiary then usually it is a grantor trust.

9. Highlights of Tax Cuts and Jobs Act of 2017 (TCJA) on taxation of foreign assets
Anti-deferral rules (CFC regime, PFIC regime), both are designed to target foreign
companies that pay no distributions and accumulate income abroad. Passive Foreign
Investment Company (PFIC). Controlled Foreign Corporation (CFC). Absent certain
elections, US shareholder is taxed upon a disproportionately large distribution. Foreign
mutual funds would trigger such reporting. Foreign insurance company may also have
issues.

TCJA expanded the definition of CFC and may have more phantom income inclusion.
TCJA also enacted a new tax regime for CFCs – GILTI “global intangible low-taxed
income”. A service related business will often implicate GILTI income tax inclusion.
US citizens may wish to make an election under Section 962 to be seen as US corporation
to avoid GILTI tax regime and complication, especially with C corporation tax now at
21%

10. Foreign Information Reporting

Penalties for non-compliance can be very severe and IRS is less willing than previously
to abate.

IRS Forms 3520, 8938 to report distributions from a foreign trust to a US beneficiary
(whether it is a grantor trust or not), IRS Form 8621 to report PFIC; IRS Form 5471 to
report CFC, FinCEN Form 114 (FBAR) to report foreign bank accounts. “US Person”
may be defined differently and even a foreign trust might be a US person for FBAR
reporting. The IRS is starting to audit Forms 3520s and 3520-A. Historically they were
not audited heavily.

SPECIAL SESSION II-E

Protecting Client Data: Ethics, Security, and Practicality for Estate
Planners
J. Michael Deege, James D. Lamm, Margaret Van Houten.
January 16, 2019

WHY ARE WE HERE TODAY?

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
134
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The practice of law is about receiving, processing and transmitting information with
clients. James Lamm (Jim) covered a brief history of information technology advances,
starting with photocopiers to fax machines, personal computers to cloud storage. All
were significant changes – but more recent changes make things more vulnerable to
cyber criminals.

As estate planners, we deal with social security numbers, brokerage accounts, tax returns
and other confidential information. That’s what criminals are looking for – we know
how to protect a piece of paper; we can lock our doors and train staff on how to put
papers away.
But now we need to take extra precautions to lock electronic data up with strong
passwords, encryption and restrict access in office – and train staff to practice safe
computing.

TYPES OF CYBER BREACHES AND STATISTICS

Michael Deege (Michael) said we should look at the numbers of data breaches, referring
a January 2019 USA Today article addressing how billions of people are having their
data stolen. You may not worry about one data breach, but when you couple them
together piece of by piece, someone might be able to piece together a profile for you.
About 72% of breaches occur by someone outside your firm.

Measuring loss in terms of numbers – the breaches have been a tremendous blow to the
economy where there has been an estimated $57 to $109 billion dollars in losses. If you
are someone who has experienced data breach, the person who caused will get caught
less than 1% of the time. If you are in a group of people, look to left, then look to right;
one of you will have a cybersecurity issue in the next 12 months.

Malware can encrypt your files, where the criminal will demand payment for money,
such as $40,000, where the criminal will return your stolen information to you in pieces,
so if you go to law enforcement, the criminal will then wipe out all of your data. The
worst password in 2017 was “123456.” The second worst was “password.”
“Phishing” can involve receiving what appears to be a legitimate email, but when you
click, a software program gets loaded on your computer and it’s too late. Some tips for
spotting phishing -- look for abbreviations or language that seems a little off. If you have
doubts, don’t click.

RULES AND TOOLS FOR PROTECTING DATA.

ETHICAL RULES.

Margaret Van Houten (Margaret) noted that the ethical rules most of us abide by are the
ABA model rules, as adopted by our states in some form. In most instances, the ABA
rules are good guidance even if your state has not adopted a particular provision of the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
135
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA model rules. The exception is California, where they have their own set of ethical
guidelines and their own sets of opinions.

The first provision relevant to cybersecurity is ABA Model Rule 1.1, which provides a
lawyer shall provide competent representation to a client. We’ve all thought this simply
means “yes, I need to know my area of law I’m practicing in.” In 2012, the ABA had
changes to comment 8 of 1.1, which says “keep abreast of changes in law and including
benefits and risk associated with relevant technology.” This rule, at least in part, requires
that we need to know about technology to better serve our clients. If you do complex
litigation you need to need to know how to use litigation support software. Possibly we
should say we need to know how to use tax software, maybe not preparing returns, but
some software that makes us determine what is potential tax liability.

Second thing we need to deal with is, assuming we use technology for something as
mundane as email to sharing large amounts of information, to make sure we are
protecting clients’ information. Question: to what length do we need to go?
Model Rule 1.6(c) requires a lawyer shall make reasonable efforts to prevent inadvertent
or unauthorized disclosure of, or unauthorized access to, information relating to the
representation of a client.” Comment 18 to this rule, paragraph c required a lawyer to act
competently to safeguard information.

We need to make sure we’re taking care of clients but also ourselves. E.g., a lawyer’s
laptop was stolen and it had information that caused a lot of problems for him. It can
happen to anybody.

IMPORTANCE OF POLICIES AND PROCUDURES

It’s so easy to click where you shouldn’t click, so big part of our practice is training and
policies. Comment 18 asks if lawyer makes reasonable efforts to prevent access or
disclosure. But what is a reasonable effort?

The comment lists main areas to ask if it is reasonable. This includes sensitivity of the
information (e.g., SSN), likelihood of disclosure if safeguards are not employed,
difficulty of implementing safeguards and the extent to which safeguards affect your
ability to represent the client. I.e., be secure, but be practical.

A client may require the lawyer to implement special security measures – or give
informed consent to forego security measures that would otherwise be required. Do you
want us to encrypt every email? Just tax returns? The panelists recommended addressing
this issue in your engagement letter.

ABA Formal Opinion 99-413 provided a lawyer could transmit information related to a
client by unencrypted email without violating model rules. But that was 1999.
In 2017, ABA issued a new formal opinion which provided that ordinarily a lawyer must
warn his client to about risks of certain email communications. So, if a client gives you
her work email, you should advise that the work email is not confidential.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
136
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Some states require advising client that email is not secure and some require client
consent before using unencrypted email. Be sure to address this in your engagement
letter. Some states require appropriate precautions when using public wifi.

Jim covered two other formal opinion – one dealt with posting comments on social
media, be aware of recommendations and disclosures without obtaining client consent.
The second opinion provides if a data breach has occurred with client information, the
lawyer has a duty to notify the client that the breach has happened so they can take
appropriate actions. What we have now is a continuing duty to monitor for data breach so
we can do notices. Interesting footnote, no obligation under ethical rules to notify former
client of data breach – another reason to send a closing letter. The panelists noted that
these opinions are just ethical rules – all 50 states have data breach notification laws and
there are also federal laws. We need to look to applicable state laws on data breach and
federal rules.

Big takeaway is security has to be balanced with practicality.

43% of attacks are against small businesses and 60% of those go out of business
afterwards.

Lawyers should train employees, hire a consultant, get risk assessment, do some
balancing and then implement.

The panelists provided links to good resources, such as IRS Pub 4557, FCC
Cybersecurity for Small Businesses and the NIST Small Business Corner (site currently
down due to government shutdown.)

Use encryption communications, data files, storage device, etc. Basically, if something
leaves office, use strong encryption and strong password.

ENCRYPTION AND PASSWORDS

The panelists covered two types of encryption and the need to send encrypted
information and a follow up with a password to open the files. They also noted that
“.docx” files have options for stronger encryption than “.doc” files.
91% of people have password on list of most common passwords. Use at least 12
characters, numbers and symbols.

If transmitting data on public wifi, use VPN or different encrypted tunnels.

The panelists noted how an accountant will often send a client’s tax return and use a
password that includes the client’s social security number.

The panelists noted your firm should have policies and committees as a good way to
think about things. If you are in a smaller firm, it’s a good idea and worth it to hire
someone outside to help -- maybe not do all policies but to help with technical end of it.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
137
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Another policy might be to require certain issues be addressed in engagement letters,

which is the best place to let clients know your policies and procedures. One panelist
noted her firm usually provides the firm has client security policies open for client review
to see if the client is interested. The panelist also noted that it might be good to start
attaching the policies. Make sure you talk about work email not being safe in the
engagement letter.

Sample language for engagement letters was provided.

FILE RETENTION POLICIES

The panelists covered file retention policies. Something you tell clients in engagement
letter, on top of thanking them for being of service, also include how long you will keep
files and when destroyed. Sample language provided.

The panelists noted there are free resources out there to help with training. Microsoft has
actual training material free of charge. When training, consider cost and availability of
resources you can draw from. Another site is ttp://www.dhs.gov – all their training
material is available.

Large firms have a higher level of security, which is why small to medium size firms are
low hanging fruit. The outline provides 16 factors that should be considered for training.
Adopt a culture that thinks about security.

INSURANCE

The panelists discussed how insurance is helpful. If you go that route, factors are in the
materials helping you determine what you should consider when evaluating a policy.
(E.g., no retroactivity exclusion.)

CLOUD SERVICES

The panelists covered cloud services. Iowa Bar Ethics Opinion 11-01 authorized offsite
storage, but you must use due diligence. A chart was included with factors you should
consider before moving all data to a cloud. Check your state opinion that authorizes it if
you are considering cloud storage.

SPECIAL SESSION II-F

Welcome to the Jungle: Re-Defining Family Amid Advances in
Reproductive Science
Sarah Moore Johnson, Carol M. Bass, Cara M. Koss
Wednesday, January 16, 2019

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
138
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA Reporter: Joanne Hindel

Introduction:

Assisted Reproductive Technology (ART) has developed at lightning fast pace, the law
governing the processes and products of ART has lagged behind significantly, creating a
perplexing body of law what tends to apply traditional principles of law to nontraditional
circumstances.

Part I – Background of Relevant Science and Current Developments in ART

Scientists began experimenting with IVF (in vitro fertilization) as early as 1945 but the
first successful birth was Louise Brown in the UK in 1978. That IVF procedure was
carried out by Robert Edwards, who won the Nobel Prize for medicine in 2010 as a result
of this work.
A few of the newest developments in the field are: ovarian cortex transplantation, mosaic
embryos, three-parent embryos, and gene editing. Additional new processes are lab-
grown eggs and use of a synthetic womb.

In Vitro Gametogenesis (IVG) is the process of creating gametes from other types of
human cells. Some refer to it as the “Brad Pitt” scenario whereby celebrity skin cells are
collected from a discarded soda can or after a stay in a hotel bed then used for
procreation.

Part II – Property Considerations

States have slowly begun to address the disposition of a decedent’s stored gametes by
statute.

The panelists reviewed the Hecht case where the girlfriend of a decedent claimed that his
frozen sperm was hers pursuant to a bequest to her in his will. The Court of Appeals did
determine that the frozen sperm constituted an estate asset and should be preserved. The
Court did not determine whether the girlfriend was entitled to the sperm however.
In Kievernagel, the Court upheld that the decedent’s instructions that his frozen sperm
should be destroyed at his death.

These court decisions indicate that courts do treat frozen gametes as property – although
they may refer to them as “unique type of property”.
Very few states have enacted statutes concerning the nature or character of frozen
embryos.

For practitioners, if you ask a client whether he/she has stored frozen gametes, you
should ask for a copy of the agreement with the institution that holds the property.
Courts that have considered the nature of frozen embryos have tried to articulate that
embryos are something more than mere property. This conclusion might arise from the
fact that embryos, unlike gametes, contain the combined reproductive material of two

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
139
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

separate persons, or because embryos have the potential for continued human
development.

The panelists discussed the well-known Loeb v. Vergara case in which Loeb sued Sophia
Vergara for custody of their embryos.

In 2018, Arizona adopted a statute that specifically addresses the disposition of frozen
embryos upon divorce. The Arizona law requires courts in a divorce proceeding to award
embryos to the spouse that intends to allow them to develop to birth.

In divorce cases courts have used three approaches: the contractual approach, the
balancing approach, and the contemporaneous mutual consent approach.
Generally, courts will first look to see if a contract exists, if not they will consider the
balancing approach by attempting to balance the respective interests of the parties.

Part III – Estate Considerations

Are embryos treated any differently if they are assets of the estate rather than marital
property in the context of divorce? If the decedents have left a clear expression of their
intent with regard to frozen embryos and assuming that intent is legal, practical and
mutually agreed upon, presumably their wishes would be followed.

Only a few states have enacted statutes to address the disposition of gametes and/or
embryos upon the death of the genetic contributor(s). Florida, California and Louisiana
are a few states with statutes.

The panelists discussed one U.S. published case in which the parents were murdered
leaving one 2-year old son and 11 embryos. The court determined that the embryos were
property of the intestate estates and determined that they would remain frozen until the 2-
year old son turns 18 at which time he will own the embryos.

Until legislatures act to create better legal solutions to these complex issues, fiduciaries
must deal with a decedent’s frozen reproductive material in accordance with the very
limited available authority. What was the decedent’s intent, on what authority can the
fiduciary act with respect to the frozen embryos (are they personal property or other
unique property?), are the embryos persons and are they part of the probate property of a
decedent?

How does the fiduciary apply the duty of prudence and value the embryos? Under the
duty of loyalty, should the fiduciary view the embryos as property or as potential
beneficiaries? With respect to the duty of impartiality, if the fiduciary consented to
implantation of the embryos and they eventually became posthumously born children,
would the fiduciary violate the duty of impartiality by increasing the number of
beneficiaries?

Part IV- Inheritance Rights of Posthumously Conceived Children

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
140
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Because of scientific advances that enable gametes and embryos to be preserved for later
usage, it is possible for such genetic material to be used for procreation after the death of
the genetic contributor. Children conceived in such manner are generally referred to as
posthumously conceived children.

Case law in this area has developed principally through claims for Social Security
survivor benefits for posthumously conceived children.

The Uniform Parentage Act (UPA) (2002) requires written consent by the decedent to be
treated as parent of a child conceived posthumously but does not contain any time
restrictions. It also only applies if the surviving parent is the child’s other parent.
The Uniform Parentage Act of 2017 requires consent in a record or clear and convincing
evidence and implantation of the embryo within 36 months of death or birth within 45
months.

Part V- Defining Descendants

As both scientific advancements and social relationships continue to grow in complexity,

can estate planning documents keep up with modern society? For example, where a will
or trust refers to “my issue” or “my descendants” how should that be interpreted in the
case of ART?

Conclusion

Not only do estate planners need to have a basic understanding of ART and how it may
affect their clients, but they also need to provide guidance to all clients regarding their
estate planning documents. Clients who are engaging in ART themselves may have very
specific and immediate needs with respect to their estate plan, but other clients should
also be considering these issues as well.

Estate planning attorneys should discuss the following to clarify the client’s intent:

• Definitions of “child”, “grandchild”, “issue” and “descendant”.

• Powers of Attorney should specifically provide for any stored genetic material
• Clients should understand any contracts currently in place that govern lifetime
rights to the genetic material including in the event of divorce or death.
• Estate planning documents should specifically address the inheritance rights of
children conceived through ART, including children conceived after death,
embryos created using donor eggs/sperm, children born through the use of a
surrogate or gestational carrier, and children born from embryos that were
donated to unrelated third parties.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
141
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
142
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #8

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #8 continues our coverage of the Institute with reports on Thursday morning
sessions. These reports cover the sessions on post-mortem planning; qualified small
business stock; fiduciary cases; planning strategies for foreign assets; protecting client
data; and redefining the family.

Report #9 will cover the first group of Thursday afternoon special sessions. Report #10
will cover the second group of Thursday afternoon special sessions. Report #11 will
cover the Friday morning sessions. Report #12 will cover some of the vendors.

GENERAL SESSION 12
Powers Of Appointment: Almost All You Need To Know About Powers
Of Appointment To Make You A Super Estate Planner
Turney P. Berry, Jonathan G. Blattmachr
Thursday, January 17, 2019
ABA Reporter: Joanne Hindel

Part I – Introduction and Basic Principles

The traditional meaning of the power of appointment is a power to designate the

recipients of property or interests in property.

The Restatement (Third) of Property, Donative Transfers 17.1 apparently took the
position that a power held in a fiduciary capacity is not a power of appointment; but it has
recanted as to decanting. The Uniform Law Commission maintains a distinction in
uniform acts between non-fiduciary acts, which are powers of appointment, and fiduciary
acts, including decanting.

Almost all state decanting statutes provide that decanting is a power of appointment
although granted to trustees.

The vast majority of powers of appointment are non-fiduciary powers of disposition over
property. A power of appointment may be granted to a trustee in a fiduciary capacity, but

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
143
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

this is less common and not what we generally mean when we address powers of
appointment.

If you grant someone a power of appointment, specify whether it is being granted in a

fiduciary or non-fiduciary capacity.

There are advantages to granting a person a power of appointment in a non-fiduciary

capacity – their actions might not be challenged by a court since they did not act in a
fiduciary capacity.

Part II – Common Uses of Powers of Appointment

An important use of powers of appointment is to allow changes to be made in trust

provisions after the trust was created. A power of appointment may also be a power of
disappointment. Many grantors want to give a senior generation almost, but not quite,
unfettered access to trust assets. For instance, give someone the power to pay over gross
income to charity. Powers of appointment may also substitute for the power of a trustee
to make trust distributions and a distribution pursuant to such exercise is generally treated
in the same manner as a fiduciary directed distribution, although the IRS position is not
entirely certain.

Powers of appointment can also be used to address issues associated with long-term
trusts. These powers are therefore useful for all kinds of trusts – not just trusts for the
wealthy.

An analogy to the use of trusts is the use of toothpaste – if toothpaste comes out of the
tube, it is very difficult to get it back in the tube – similarly if assets are removed from the
trust, it is very difficult to get the assets back into the trust. Use of the powers of
appointment allows you to keep the assets in trust for a long period of time but creates
flexibility to address changing circumstances over time.

Powers of appointment can be used to move assets around so that they end up in the
estates of the oldest and sickest beneficiaries in order to reduce the tax consequences of
ownership of those assets.

Sprinkle general powers in order to achieve new basis in trust assets.

Consider the “circumscribed general power of appointment” which has the following
characteristics: is exercisable to the creditors of the powerholder’s estate; only
exercisable by will; with the consent of a non-adverse party; capped at the maximum
applicable exclusion amount; and consists only of assets having a fair market value in
excess of basis.

Part III – State Law of Powers of Appointment with Primary Reference to the Uniform
Act

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
144
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The Uniform Powers of Appointment Act (the Uniform Act) was promulgated in 2013. It
has been enacted in Colorado and has been introduced in California, Mississippi and
Utah. The Uniform Act is limited to non-fiduciary powers.

In 2015, the Uniform Law Commission adopted the Uniform Act on Trust Decanting
which deals with fiduciary powers.

The Delaware Tax Trap -- A powerholder may exercise the power to create a new power
of appointment. If the first power is a general power and the exercise occurs by will, the
appointive assets will be subject to federal estate taxation. If the first power is a general
power and the exercise occurs inter vivos, the exercise “shall be deemed a transfer” for
federal gift tax purposes.

If the first power is a non-general power, its exercise to create a new power of
appointment that has the effect of postponing the period of the Rule Against Perpetuities
converts the non-general into a taxable power for purposes of sections 2041 and 2514.
In states that don’t have a rule against perpetuities anymore the Delaware Tax Trap does
not work.

Conclusion

Always look for a power of appointment to extend the duration of the trust and delay the
taxation of the assets on distribution to the beneficiaries.

GENERAL SESSION 13
The War on Money Laundering: Making Lawyers and Accountants
Part of Law Enforcement
John A. Terrill, II and John Riches
Thursday, January 17, 2019
ABA Reporter: Michael A. Sneeringer

I. INTRODUCTION

Mr. Terrill indicated that the international community wants attorneys to be “cops” in the war
against money laundering and terrorist financing. He noted that this mandate will be
applicable to accountants in the future.

Mr. Terrill used the movie Scarface and the Netflix show Ozark to illustrate money
laundering and converting the proceeds of crime into assets.

Mr. Terrill noted that through the Financial Action Task Force (“FATF”) best practices were
created. He noted that FATF offered “Forty Recommendations” aimed at the financial
system, client/customer, due diligence, suspicious activity/transaction reporting, and no-

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
145
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

tipping off obligations that, while perhaps expensive, often client-unfriendly and sometimes
maddening, have become routine.

Mr. Terrill noted that two things have developed since FATF. He indicated that after 9/11,
terrorist financing was added. He noted that FATF also created a category of Designated
Non-Financial Businesses and Professions” or “DNFBPs”, through Recommendations 22
through 25 of the Forty Recommendations.

Mr. Riches added that it is important for advisors to look at the overall fact pattern in doing
due diligence. He noted that the pace of change in this area has increased. He added that the
Foreign Account Tax Compliance Act (“FATCA”) has helped drive the interest in this area
and that CRS was aided by FATCA’s emergence.

II. ONBOARDING

Mr. Riches talked about onboarding trusts. He noted that proper due diligence must be
performed on beneficiaries and the trust itself. He discussed the failure to report offenses that
can occur if an attorney knows that a client is involved in money laundering. He noted that
the reporting does not just stay with your client but all indicia related to the client and
his/her/its transactions.

III. SUSPECTING SOMEONE INVOLVED IN CRIMINAL ACTIVITY

Mr. Terrill and Mr. Riches had a back and forth discussion on how the reporting requirement
works in practice. Mr. Terrill noted that attorneys have to stop what they are doing and take
the time to report the activity. Mr. Riches noted that other firm members play a role in aiding
the attorney in this endeavor such as paralegals and assistants.

Mr. Riches noted that in the U.K., 1.7% of lawyers, accountants and tax advisors have
reported such activity. He indicated that there is work to be done in this area in the U.K. He
noted that if you make a false statement regarding suspected criminal activity, the statement
maker can be punished.

Mr. Terrill highlighted unexplained wealth orders. He noted a Wall Street Journal article that
was recently published highlighting an unexplained wealth order and purchase of jewelry.
Mr. Riches discussed the sensitive nature of attorney-client confidentiality and the reporting
obligation requirement. He noted that there is grandfathering point in the U.K. concerning
reporting (he analogized to criminal conduct in the 1800s being too far out of scope).
Mr. Terrill indicated that each nation has FATF style reporting requirements. He added that,
in the U.S., things differ from other FATF nations. He discussed that various groups have
taken positions on the FATF’s proposals, and the American Bar Association (“ABA”)
expressed its policy of strong opposition to suspicious activity reports (“SAR”), No Tipping
Off (“NTO”), and Suspicious Transaction Reporting (“STR”) requirements for lawyers. He
added that the ABA takes the position that it will educate its lawyers and that lawyers have
been guided by the ABA’s Model Rules of Professional Conduct. He noted that identifying
issues is crucial to making sure that an attorney is not inadvertently adding to the money
laundering problem.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
146
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mr. Terrill summarized a more recent 60 Minutes piece that illustrated lawyers in an initial
consultation with an undercover “operative”, and how those lawyers faired in dealing with a
“potential” client who clearly wanted to launder money (“Anonymous Inc.” from January 31,
2016).

IV. APPLICATION OF THE MODEL RULES TO ATTORNEYS

Mr. Terrill discussed excerpts of key Model Rules of Professional Conduct as they pertain to
STR/NTO obligations including:

A. Model Rule of Professional Conduct 1.1(a). A lawyer shall provide competent

representation to a client. Competent representation requires the legal knowledge,
skill, thoroughness and preparation reasonably necessary for the representation.

B. Model Rule of Professional Conduct 1.2(d). A lawyer shall not counsel a client to
engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent,
but a lawyer may discuss the legal consequences of any proposed course of conduct
with a client and may counsel or assist a client to make a good faith effort to
determine the validity, scope, meaning or application of the law.

C. Model Rule of Professional Conduct 1.4(a). A lawyer shall consult with the client
about any relevant limitation on the lawyer’s conduct when the lawyer knows that
the client expects assistance not permitted by the Rules of Professional Conduct or
other law.
D. Mr. Riches indicated that a U.S. attorney practicing in the U.K. runs into problems
with Rule 1.4(a) and what would be expected in the U.K.

V. CONCLUSION

Mr. Terrill concluded by discussing geographic targeting orders (GTO) programs and the
U.S. He indicated that GTOs are assisting the U.S. in greater numbers. He noted that banks
are prompting clients when opening bank accounts to inform them of whom the “beneficial
owner” is (and this trend will continue).

GENERAL SESSION 14
Don’t Dis the Disclaimer: Know the Rules to Keep Up with a Changing
Game
Miriam W. Henry
Thursday, January 17, 2019
ABA Reporter: Scott Hancock

Part I – Introduction

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
147
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ms. Henry started the session by stating that the goal of the session was to pay some R-E-S-
P-E-C-T to the often ignored disclaimer. She continued that the difficulty with disclaimers is
that their use often is correlated with hard times for people, such as when a family member
has died. In addition, many individuals do not want to “look a gift horse in the mouth” by not
accepting a gift left by a family member. As a result, it may be necessary to further educate
clients to illustrate that disclaiming a gift does not mean that one is ungrateful for that gift but
rather that a disclaimer is a tool to implement a more appropriate estate plan based on current
circumstances.

Part II – Rules of Federal Disclaimers

Ms. Henry next discussed the rules of federal disclaimers. Under Code Section 2518, the
potential recipient of an interest is treated as if he or she never received the gift if such person
disclaims the interest pursuant to the requirements under the statute. This is referred to as a
qualified disclaimer, which must meet the following requirements:

• There must be an irrevocable and qualified refusal by a person to accept an interest in

property,

• The disclaimer must be in writing,

• The writing must be received by the transferor in time (i.e., 9 months),

• The disclaiming person must not have accepted the interest or any of its benefits, and

• The disclaiming person must not direct the disposition of the disclaimed interest,
which must pass to the surviving spouse or someone other than the disclaiming
person and may include a trust.
Writing

The writing needs to identify the interest being disclaimed and be signed by the disclaiming
person or the disclaiming person’s legal representative. The writing needs to be delivered to
the transferor, transferor’s legal representative, holder of legal title of the interest, or person
in possession of the interest. Local law may be relevant in determining the delivery of a
qualified disclaimer.

Timing

Generally, a qualified disclaimer must be delivered within nine months from the date of the
transfer. However, this is extended for a beneficiary under the age of 21 at the time of the
transfer, until nine months after such beneficiary attains age 21.

An inter vivos transfer occurs when there is a completed gift for federal gift tax purposes
whether or not a gift tax is imposed. A transfer at death occurs on the date of death. If an inter
vivos transfer is included in a transferor’s gross estate, the date of the transfer remains the
date there was a completed gift for federal gift tax purposes.

A holder of a general power of appointment has nine months from its date of creation to
disclaim. A transferee of an interest as a result of the exercise or lapse of a general power of
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
148
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

appointment must disclaim within nine months of the exercise or lapse. A holder of a limited
power of appointment has nine months from its creation to disclaim.

Life tenants and remainder beneficiaries must disclaim within nine months from the original
transfer creating such interest. A beneficiary of QTIP has nine months to disclaim from the
date of the transfer creating the interest.

In some circumstances, there may need to be a series of disclaimers to get the interest to the
correct ultimate beneficiary. In such circumstances, all such disclaimers need to occur within
the nine month period. As a result, it is important to implement a plan early in the process in
order for all disclaimers to be made timely.

For trusts created before January 1, 1977, a disclaimer may be made within a reasonable time
after knowledge of the existence of the transfer.

No Acceptance

The disclaiming person must not accept the interest or any of its benefits before making the
disclaimer for a qualified disclaimer. The following indicate acceptance of an interest:

• Actual acceptance of the interest,

• Using the interest,

• Accepting dividends, interest, rents, or other income from the interest, or

• Exercising a general power of appointment to any extent.

The following do not indicate acceptance of an interest:
• A fiduciary accepting deliver of the interest,

• Operation of local law resulting in immediate vesting of title, or

• Continuing to reside in community property residence.

It is possible to accept some assets in an account but not others, and still be able to disclaim
the account assets not accepted.

A beneficiary of a trust may disclaim some assets in a trust but not others or may disclaim a
portion of a trust based on a percentage or formula, if otherwise allowed pursuant to the trust
agreement and local law. A beneficiary may disclaim severable interests in a trust under the
correct circumstances.

No Direction

A disclaiming person may not retain any right to direct the disclaimed property. This might
occur by a side deal between the disclaiming party and the ultimate beneficiary.

GST Implications

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
149
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The Treasury Regulations indicate that the GST tax applies the same as it would without a
disclaimer. As a result, disclaimers to skip persons or trusts for the benefit of skip persons
should be analyzed for GST tax purposes.

Who May Disclaim

Individuals and their fiduciaries may disclaim if fiduciaries are acting according to local law.
Part III – Pre-1977 Transfers

Ms. Henry next discussed PLR 201831003 regarding what constituted knowledge for
purposes of making a disclaimer with respect to a pre-1977 transfer. According to the PLR,
the person desiring to make a disclaimer of an interest in trust had no prior actual knowledge
of the trust, had not previously received a copy of the trust or trust terms, and had not
previously received benefits from the trust. As a result, the IRS determined that the person
did not have knowledge with respect to the interest in trust until the death of the prior
beneficiary, and therefore, could still make a qualified disclaimer within nine months of the
prior beneficiary’s death.

Part IV – Conclusion

Ms. Henry concluded the session by highlighting the use of disclaimers in the following
areas:

• Outright dispositions to a surviving spouse with the possibility to disclaim to a family

trust.
o Alternatively, a Clayton QTIP trust may be utilized.

• Disclaiming by children of severable interests in a trust.

o This might provide additional GST tax planning opportunities.

• Disclaiming for asset protection purposes.

• Disclaiming for charitable planning purposes.

o It is possible to use a formula disclaimer to reduce tax.
o It is possible to disclaim to private foundations and donor advised funds
provided certain requirements are met.

• Disclaiming of retirement benefits.

GENERAL SESSION 15
Cutting the Gordian Knot of Insurance Transactions
Thursday, January 17, 2019
Mary Ann Mancini
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
150
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA Reporter: Dave Slenn

Mary Ann started off by summarizing her presentation’s content – she will be covering
situations where the transactions turn bad but the insurance policy is still good. This is in
contrast to a situation where the transaction is good but the policy is bad. She mentioned
that her presentation later in the day will cover steps to unwind bad transactions.

Mary covered situations where a policy can be “good.” The first example was a policy
where the insured is uninsurable. If there is a need for liquidity, the policy is good
because the insured cannot obtain insurance elsewhere.

Her second example was where the cash value was built up to the extent where it was
performing quite well. In prior years, less policies were performing as well as we’d like,
but recently policies have been performing better. However, a well performing policy
with cash value can actually cause a transaction to be bad. In a sense, it can a Catch-22
as to whether you have a good policy but could be a bad transaction because of the cash
value.

Her third example was a policy that had riders you’ve been paying for that you can no
longer purchase. She has a client who is 98, and the rider allows the policy to continue
on as long as she lives. This is good, because she believes the client will live to 104.
Obviously, they don’t want to lose that rider.

Another example is a policy with a no lapse guarantee.

A whole life policy might be good as it can have a rate of return that might be higher than
if you acquired a new policy.

Yet another example is a policy where the carrier has higher reserve – you like reserves
because it backs the policy up.

Finally, there is a creditor protection aspect to life insurance policies which varies by
state.

THREE COMMON TRANSACTIONS

Mary Ann said there were three common situations where the transaction could turn bad.
The first is a policy held in trust; the second is a split dollar arrangement; the third is
where the policy is held by a business or business owner and no longer necessary that the
business or business owner own the policy.

TRUSTS

A trust can go bad for client in a variety of reasons, nothing to do with trust itself. A
family situation might change resulting in some beneficiaries no longer being
appropriate. There are ways to change terms of a trust, but many times, the clients want

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
151
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

to start over and don’t want “incorrect” beneficiaries seeing the trust agreement. So get
the policy out of the trust and fund a new trust.

Other issues with the trust involve a problem with the agreement, such as a tax or drafting
problem.

Changes in law might make the trust no longer desirable. The most common is the
increase in estate tax exemption, taking into account both federal and state.

SPLIT DOLLAR TRANSACTION

The second type of transaction that can go bad is the split dollar arrangement, which can
be characterized as either economic benefit or loan arrangement. Mary Ann covered the
different reasons these two arrangements might stop working for your client.

SPLIT DOLLAR - ECONOMIC BENEFIT

She discussed the economic benefit arrangement first. One reason this would be
desirable to terminate is because the economic benefit reportable each year is becoming
too explosive. In economic benefit split dollar, what is transferred from the person
advancing the money into the arrangement and to the owner of the policy is the economic
benefit – the cost of insurance protection provided to the owner each year when premium
is paid. The premium can be $100,000 but if 85 years old, your economic benefit could
be $300,000. Mary Ann stressed the economic benefit is the insurance protection the
owner receives each year. It goes up each year as the insured gets older. Mary Ann then
covered three reasons why the economic benefit arrangement could be too expensive.
These reasons are a (1) potential gift by person creating trust/funding the split dollar
arrangement, (2) taxable income if insured receives benefit as employee of company or
(3) based on a change in how the economic benefit is measured (using IRS tables or using
carrier’s own rates which are lower than IRS factors.)

SPLIT DOLLAR - LOAN ARRANGEMENT

The loan arrangement is where you loan money to the owner of the policy and the owner
then pays back the loan amount at some future point with interest paid or accrued every
year on that loan with the interest rates are controlled by the AFR (which varies based on
the length of the term.) Mary Ann said the cause for concern here is rising interest rates,
and compared one big loan capturing an interest rate versus loans every year as the
premiums come due.

SPLIT DOLLAR - CHANGE IN LAW

Another reason you may find your split dollar arrangement isn’t working is because of a
change in law. The biggest change was in 2003, when all of the sudden, instead of
working off revenue rulings that built the area of split dollar, we were subjected to the
final split dollar regulations for all arrangements that were entered into after the date of

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
152
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

the final regulations or were “materially modified” after that date. This caused a lot of
concern because the way the regulations treat split dollar was different than before. Mary
Ann discussed the potential issues associated with the proper treatment of equity in the
arrangement, including Notice 2002-8 and Neff v. Commissioner.

Another change in law involved the treatment of intergenerational split dollar

arrangements (ISDA), where the employee in a company or the insured is advancing
money. In the ISDA, the insured is usually a child of the patriarch, and will provide a
lower economic benefit, because the child is much younger than the patriarch. So a
father might get insurance on his daughter’s life and pays for it (that way the kids don’t
complain.) An issue arises with the treatment of an advancement – a large amount is put
in the policy, and then money is taken as an advance to the holder of the policy. Mary
Ann covered Morrisette where the tax court found a split dollar arrangement – a non-
equity split dollar arrangement - subject to the final regulations. The tax court did not
find a gift on the transaction, but there are unresolved issues (e.g., valuation of
receivable.) Mary Ann also mentioned the Levine court might reach a decision on the
topic.

INSURANCE IN THE BUSINESS SETTING

Mary Ann mentioned how businesses will own life insurance to help obtain credit, as
well as business succession purposes. In the closely-held business situation, insurance
can be owned by the company itself and when one owner dies, the company will redeem
owners using insurance (corporate redemption) or a cross purchase may be in place
where all owners have insurance on other owners. If one owner dies in the cross
purchase situation, other owners will have cash flow to buy the decedent’s shares or
ownership interest from the estate of the owner. Another option is to “wait and see.”
A situation may arise where only one owner is alive, and he doesn’t need insurance on
his own life, or if a shareholder does not want a company to won insurance on the
owner’s life. The relationship between owners could be aggressive and they don’t want
to sell ownership interests to enable another owner to buy them out. So there are reasons
why you might have a good policy but no longer owned by owners or the business. Mary
Ann then discussed distributing the policy out, and how you need to be careful about the
tax consequences.

She mentioned the transfer for value rule, and five exceptions to the rule, as well as a
sixth exception that doesn’t get talked about very much. She said if you are captured in
this situation, you can fix it by making a transfer that fits into the exceptions.

====================================================

We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
153
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
154
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #9

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #9 continues our coverage of the Institute with reports on some of the first
group of Thursday afternoon special sessions. Those sessions covered powers of
appointment, unwinding life insurance transactions, foreign activity reporting obligations,
and transfer tax audits.

In a change from what we previously announced, Report #10 will cover the remainder of
the first group of Thursday special sessions. Reports 11 and 12 will cover the second
group of Thursday afternoon special sessions. Report #13 will cover the Friday morning
sessions. Report #14 will cover some of the vendors.

SPECIAL SESSION III-A

More of What you need to Know About Powers of Appointment
January 17, 2019
Turney P. Berry, Jonathan G. Blattmachr, and Carol A. Harington
ABA Reporter: D. W. Craig Dreyer

This was a follow up to the general session. The Panel discussed how the session would
cover tax and non-tax issues with powers of appointment.

Powers for Basis Step Up

They began with a discussion about upstream powers of appointment since this was a
matter that many people had questions regarding after the morning session. The panel
explained that you can sprinkle circumscribed general powers of appointment within a
trust. If someone is about die without enough assets to fill their exemption, we can move
assets into their estate to get new basis on those assets at their death.

One way to do this is with an UPSTAT (Upstream Power of Appointment Trust). You
create a grantor trust and give mom a testamentary general power of appointment and
then sell those assets to the trust for a note. Mom personally guarantees the note. When
mom dies, the assets are paid back through the note. The trust is includable in grantor’s
estate, but the grantor for tax purposes never changes. It is important to remember that we
are not trying to remove these assets from the grantor’s estate. The amount sold to the
trust should not be enough to generate gift tax for the son if it were deemed a gift and the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
155
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

amount included in mother’s estate is not so much it causes an estate tax. In an ideal
world, the assets do not need to appreciate at all. The panel noted that the IRS could
attack on a step transaction theory, but the commentators are not worried because the sale
is a bonified sale. The general power is a general power so it causes inclusion.

Can you give a general power of appointment to a parent to get step up or down in basis?
Yes, but you may have gift tax implications. The sale allows you to make a transfer
without using up exemption. The panel noted that by using the Crane case and section
2053, you get a step up on whole trust since mom guaranteed the loan. In addition, Reg.
1.742-1 confirms this.

Creditor Issues

The panel also discussed the potential creditor issues of whether granting a general power
of appointment would subject those assets to the power holder’s estate creditors. At
common law, the answer was no unless: 1) the power is general, and 2) the power holder
exercises the power. There was no distinction between testamentary and presently held
powers. A non-general powerholder’s creditors could not reach the assets even if
exercised. In Illinois, an unexercised general power of appointment does not subject the
property to claims of creditors. However in some states like NY it does. One alternative
to granting general powers is to exercise the Delaware tax trap. To limit the exposure of
a general power, the panel noted that you can always limit the general power by formula
to achieve the basis step up goal.

The panel also discussed the issue of the ability to appoint assets to creditors of the estate.
If a person owes someone $100, can the person appoint assets of 1 million to the
creditor’s estate from the trust. Since the answer is unclear for property law and tax
purposes, the panel noted you may want to provide a broader power than simply creditors
of your estate.

Contracts to Exercise Powers

In an attempt to settle disputes and often as part of the settlement deal, people want to
agree to exercise or non-exercise powers. Under common law, contracts to exercise
powers are not valid. Limited powers exercised for consideration are a fraud on the
power, since it benefits the powerholder and you can’t have consideration for exercising a
power. For a limited power you can’t exercise for consideration, but a general power you
can. Often in litigation settlements, pre-marital agreements, and enforceable charitable
pledges you see improper uses of powers. A testamentary power of appointment to
satisfy a pledge is invalid, since you cannot use it to discharge a powerholder’s legal
obligation. Essentially, in this case, the charity becomes a creditor of estate, and this
violates the limited power. The panel noted that you must be especially careful in these
contexts.

Release

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
156
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The panel noted at common law you can release anything, but statutes may have
abrogated the common law right of release through some of their disclaimer statutes. The
panel discussed a recent Delaware case where the Court determined that the parent could
not irrevocably release a power of appointment. The panel discussed alternatives such as
giving a group of people a non-fiduciary power to remove a beneficiary. By making it
three people, this spreads the liability and makes it a stronger provision.

Decanting

The panel discussed how the majority believe decanting is theoretically different from a
power of appointment, but Jonathan views decanting as simply a power of appointment.
They noted that you can decant in many states now to fund a special needs trust to protect
the beneficiary from losing government benefits. About 40 states have decanting statutes
today. The panel discussed how decanting must be done in a fiduciary manner. The
panel also noted that if you decant, be sure to make sure you do not lose GST benefits. In
addition, the panel noted at common law you could not appoint to yourself, including
appointing to a trust with you as beneficiary, even if the original trust had you as
beneficiary. The panel believed that giving a power of appointment to modify terms of a
trust is generally better rather than appointing to a new trust.

Non-Fiduciary power Holder Ability to Amend Trust

The panel went on to discuss how many clients have made substantial gifts and worry
kids will go off the rails and give lifetime POA’s in a group of people. Periodically the
settlors asks the power of appointment holders to modify the trust to remove trustees
and/or add benefactrices. The panel noted that have concerns over the settlor being
deemed to have control over the trust in this scenario, since the power holders generally
hold the power in a non-fiduciary capacity to eliminate liability. However, since the
power is held in a non-fiduciary capacity, the IRS has a better argument since there are
no fiduciary duties involved to push back on the settlor making changes. A settlor can
tell a trustee to do anything, but the trustee has duties that prevent the trustee form acting,
which is drastically different from a non-fiduciary power holder. The panel noted that
decanting is often occurring at the settlor’s request through a non-fiduciary power holder,
and the panel noted that there is a strong argument for inclusion by the IRS in these cases.

Choice of Law

The panel also discussed how a power of appointment or decanting could allow a person
to move a trust to another jurisdiction. If you have a power of appointment, what law
governs what you can do? People often move trusts without any regard to the original
law the trust was created under. This may change pertinent terms on beneficiaries and
cause issues with generation skipping taxes. Does decanting from a state with rule against
perpetuities to a state without the rule against perpetuities cause the trust to be void ab
initio? Thus, it is unclear what really happens when these things occur. The panel noted
that you should never change the law of construction, since this can dramatically change
beneficiaries who are heirs. On the administration side, the situs of the trust governs. It

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
157
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

is unclear whether the Principal and Income Act is a rule of construction or rule of
administration. Some states say it’s a rule of administration, and if all states did, this it
would eliminate the issue. The panel also noted that the definition of descendants can be
altered dramatically because adoption law is surprisingly non-uniform from state to state.
Ability to Appoint Assets by Will

The panel noted that with the evolution of testator intent and electronic wills this may
provide more challenges in the future. The questions of “what is a will?” may start to be
a concept that is more challenging than today. If a document allows a power of
appointment to be exercised by will, what should qualify as a will? Does the law of the
trust or the law of the power holder control? If consent is required to exercise a power of
appointment, when is the consent required, before or after death, within what time frame?
These are all issues we may want to address today to prevent problems in the future.

Special Session III-B

A View from the Trenches: What’s Happening with Transfer Tax
Audits/Controversies in the Era of Higher Exemptions?
John W. Porter and John W. Prokey
Thursday, January 17, 2019
ABA Reporter: Patrick J. Duffey

The panel explored recent developments in tax controversies, including audits, relating to
transfer taxes. The discussion began with an analysis of general legal principles in transfer
tax valuation, including a determination of property rights, the impact of consideration, the
legal standard for valuation, and special valuation issues (including pre- and post- valuation
date events, valuation methodology, and fractional interests).

As a segue into the discussion on recent substantive developments in audits and tax
controversies, the panel began with a brief discussion on statistics, which provided needed
context. While many thousands of gift tax returns are filed annually, only a small fraction
(about 2,800 per year) are taxable. Though total gifts given have doubled since 2005, gift tax
revenue has remained flat at $1.7 billion. On the estate tax side, the IRS has projected that
there will be 4,000 returns filed in 2019 with only ten percent of those being taxable and total
revenue of $15 billion. The panel noted that if audit capacity remains at current levels, the
IRS will be able to audit every taxable return.

The panel warned estate planners to be conscientious in making adequate disclosures at the
gift tax level because the IRS does review those returns and will set aside returns that they do
not believe meet the adequate disclosure threshold and compare those returns to the eventual
estate tax return of the taxpayer.

The panel also noted that they expect that the Service will target usage of the deceased
spouse unused exclusion (DSUE) and warned that it is therefore important to obtain good
appraisals even when filing a mere “portability” estate tax return. Without good appraisals,
those initial returns will be very difficult to defend twenty years down the line.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
158
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Another trend explored by the panel was IRS audit staffing. Porter noted that he is seeing
audit staffing shift nationally based on workload capacity. Thus, a California taxpayer might
be working with a New York examining agent on audit. Because this has become routine,
practitioners should not be alarmed when the examining agent is not local.

The panel explored the adequate disclosure requirement and its importance at the audit level.
To start the statute of limitations, adequate disclosure is required. For example, in a sale
transaction that the government later claims is a gift, without a gift tax return and adequate
disclosure statement, that transaction is fair game on the client’s death. Practitioners should
therefore consider the advantage of the comparatively lower audit rate of gift tax returns
compared to estate tax returns.

Disclosure, the panel noted, ultimately is a client decision. Practitioners should urge
adequate disclosure, however, where appropriate. Timing of the adequate disclosure is an
important consideration and the panel opined that returns filed during the current
administration might face less scrutiny than returns filed in subsequent administrations, due
to some of the distractions happening in federal government.

Turning to a discussion of the importance of framing tax controversies, the panel discussed
Cavallaro v. Commissioner. TC Memo 2014-189. That case involved the merger of two
corporations involved in something of a joint business venture, one owned by the parents and
another owned by the children. A few years later, the new company was sold to a third party
for $50 million and the taxpayers filed income tax returns reflecting those gains. Those
income tax returns were audited. During the income tax audit process, the examining agent
(on the income tax side) flagged the merger and referred the issue to a gift/estate tax manager
who opened a gift tax audit. The issue was whether the parents made a gift to their children
by merging the two companies and taking an interest in the new company that was
disproportionate to the value of the company that they contributed to the merger. The Tax
Court determined that parents should have gotten about triple that percentage interest that
they actually received and treated as a gift the difference between those two amounts.
The panel raised a number of questions about Cavallaro, including the nature of the property
rights transferred. While it did not come up in the case, state property law rights are critical.
Porter opined that the intellectual property rights were not quite as clear as the parties
believed. That issue was not addressed in the case and could have had a significant impact
on the valuation. Another issue that was not addressed in the case was whether the gifts, as
determined by the court, were properly valued. Lack of control and lack of marketability
discounts should have been applied to the interests received by each of the three children
because, though they collectively received a majority of the new company, individually they
each received a non-controlling minority interest.

Prokey discussed the need, when litigating these cases, to consider how procedural issues can
result in disqualification of an expert witness. So in cases with key assumptions,
practitioners might consider retaining two witnesses: one taking each side of that assumption
so that if one gets thrown out by the court, the client still has some evidence for his or her
position.
The panel noted that Cavallaro was appealed and is not back on remand. The principal issue
is the validity of the criticisms raised by the taxpayers’ expert of the government’s expert.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
159
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Porter noted that it is almost routine now for IRS examining agents to refer matters to in-
house appraisers, who take an initial look at the valuation. In his experience, the process
often takes between six and eight months. The quality of those appraisers is uneven and the
length and quality of the reports they produce can vary significantly. While some reports are
thorough and quite detailed, others are a half-dozen pages and closely resemble prior reports
by that appraiser. In litigation, the Service gets outside appraisals and, occasionally, in larger
audit matters. According to the panel, there seems to be no rhyme or reason to the Service’s
choice to retain an outside appraiser in an audit, so practitioners should not be alarmed if they
are faced with that situation. Porter’s observation is that the primary consideration is not the
complexity of the issues or the amount at stake but whether IRS funds are still available
during the fiscal year.

The panel explored a number of topics relating to valuation of assets. Prokey discussed the
utility of unaccepted offers to purchase an asset. If there is no better evidence, then these
offers will have strong evidentiary value, but often those offers will not be the only evidence
of value. Thus, it is about embracing the facts you have and work with an appraiser that
understands how to put together the pieces.

Another hot-button valuation topic with the Service is tax affecting flow-through entities.
Porter explained that many discount rates are derived from those applied to publicly traded
companies and, in order to compare apples to apples, the earnings of the closely-held flow-
through entity must be tax affected. Despite wide acceptance in the appraisal community, the
government continues to take the position (and has been successful in the past) that earnings
should not be tax affected. Porter is a strong believer that you should tax affect the cash flow
at the corporate level and recommended that the audience read a book by Keith Sellers and
Nancy Fannon, Taxes and Value: The Ongoing Research and Analysis Relating to the S
Corporation Valuation Puzzle.

The panel noted that if the appraiser does tax affect cash flows, it is critical to address the
reason why that is being done in the valuation report. Also important is to include in the
report is a determination as to whether there is any benefit associated with flow-through
status.

Practitioners, the panel predicted, have not seen the end of this issue. But despite the
Service’s obstinacy in this regard, Porter has settled a number of these cases in a “backdoor
way.” While the examining agent may flatly refuse to tax affect the cash flows, that refusal
substantially shrinks the pool of hypothetical buyers by effectively excluding any
hypothetical buyer that would purchase the entity if it were a c-corporation but would not (or,
in the case of s-corps, cannot) purchase the entity as a flow-through.

The panel then turned to Code Section 2036. In all the 2036 cases since 1996, the panel
observed that “what you see is a ‘smell-test’” being applied by the court. Of those cased, in
every instance (save one) in which the taxpayer has won, the taxpayer has satisfied the full
and adequate consideration test. It is important, therefore, to identify and document non-tax
reasons for entity creation. The panel listed a number of potential non-tax reasons that can
work, including centralized asset management; involving next generation family members in
the management of family assets; avoiding fractionalization of important assets; and avoiding
imprudent expenditures by future generations. Prokey noted that not all assets are created
equal; for example, it is much easier to establish a bona fide non-tax reason for forming a
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
160
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

holding company to own and manage real property than an entity owning solely securities
and other liquid assets. The panel also warned that planners should take care to ensure that
other planning (that is, planning not relating to the entity) is consistent with the bona fide
non-tax purpose and does not undermine that purpose.

The panel concluded with a discussion of the use of formula clauses when transferring hard-
to-value assets. Such clauses, the panel opined, were an essential tool for planners and truly
served as a “poison pill” for the IRS during an audit. There are various types of formula
clauses, including defined value clauses, value adjustment clauses, and price-adjustment
clauses. Reversion clauses, however, clearly do not work. The panel emphasized that this is
not a one-size-fits-all analysis. It is important for practitioners to determine the right clause
for the situation. Another important aspect is the follow-through and practitioners should be
sure to respect the clause in subsequent tax returns, operation of the entity, and other
documentation.

SPECIAL SESSION III-C

Unwinding An Unworkable Transaction With A Workable Policy
Mary Ann Mancini; Lawrence Brody; Todd I. Steinberg
Thursday January 17, 2019
ABA Reporter: Joanne Hindel

Reasons to retain a policy: cash surrender value is high and can support the policy and/or
provide a source of liquidity to the owner; insured is uninsurable or the cost of insuring is
prohibitive; new products may not offer the returns of the existing policies; there are creditor
protection aspects with life insurance policies.

The following are circumstances when the estate planner or client is interested in unwinding
the insurance policy transaction.

Part I- Life Insurance Trusts

Often clients want to start over and get the policy out of the trust and fund a new trust or new
transaction. Trusts may also have drafting problems or tax problems or changes in the law
might be the reason that settlors want to unwind the trust and remove the insurance policy
from it. The increased federal exemption is a good example. Many settlors have ILITs that
were created when the exemption was much lower than today. Be careful since the increased
exemption is scheduled to sunset in a few years.

You might have a workable policy in an unworkable transaction – how might you undo an
ILIT with a good policy?

How can you “undo” an ILIT that is in an otherwise irrevocable trust when the settlor cannot
amend or terminate? With the increased exemption in gifts, additional gifts could mean no
more premium payments. Gifts could be used to pay directly for the policy or could be made
to the trustee and then through the trustee be used to pay premiums.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
161
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

You could consider fixing an ILIT by changing its terms. One possibility is to decant to a
“better” ILIT- generally the trustee must have broad discretionary distribution powers. May
require notice to various beneficiaries.

If available, a non-fiduciary trust protector could terminate or amend but recognize that
termination would result in a distribution of the policy to the beneficiaries.
Consider a court reformation but that will probably require notice to the settlor and all
beneficiaries.

Another possibility is to distribute the policy to the adult beneficiaries or distribute the policy
to another ILIT – these are actions done by the trustee.

The trustee might also consider selling the policy to another ILIT but will need to consider
the transfer for value rules.

Part II- Business Planning with a Policy

What happens when a policy is held in a business or by business owners?

Businesses get insurance on their owners for a variety of reasons – providing funds needed to
buy a deceased owner’s interest or to provide liquidity for the business owner’s family to
ensure that they are not financially dependent on the business after the owner’s death and to
meet the estate tax burden that may arise upon the owner’s death.

Businesses can pay for the policy out of the assets of the business; with a cost sharing
arrangement; with compensation paid to the employee; or through third party premium
financing arrangements.

If there is no insurance, the business may have to continue to pay expenses as they arise;
borrow funds; create an investment fund in the business or sell the business.

If the business no longer wants the policy it might distribute the policy to the insured or sell
the policy.

Part III- Economic Benefit Split-Dollar Arrangements

A Split Dollar Arrangement (SDA) is an agreement between two parties that “splits” the cost
of maintaining the policy.

SDAs are used to pay large life insurance premiums with minimal gift tax implications.
They are still advantageous with “temporary” enhanced gift/estate exemptions.
The economic benefit is premium insensitive, both as to the level of the premium and
whether a premium was paid in a given year. An economic benefit arrangement can become
too expensive.

Traditionally the economic benefit was measured by the lower of the carrier’s qualifying
term rates or the IRS table rates established in 2002.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
162
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Today, many insurance companies do not sell products that qualify to use the carrier’s rates,
which are much lower than the IRS table rates.

Prior to the Final Split Dollar Regulations loans were subject to the general rules of section
7872 if the trust was a non-grantor trust.

The Final Split Dollar Regulations define a split-dollar arrangement as one between an
“owner” and a “non-owner” of a life insurance contract, pursuant to which either party pays
all of the premiums and at least one party is entitled to recover all or a portion of those
premiums and that recovery is to be made from or is secured by the proceeds of a policy.

Problems with Economic Benefit SDAs are the increasing annual economic benefit cost.
Carriers may no longer provide annual required reporting of alternative term rates.
Another problem can also come from the age of the insured because the annual Economic
Benefit cost increases each year with age and may become impractical if death is the only
exit. On a survivorship policy at the death of one insured there is an immediate, substantial
increase in the annual Economic Benefit cost. There may have been a change in the
circumstances or the law and the SDA is no longer workable.

Another problem is substantial equity in grandfathered Economic Benefit SDAs due to

impressive policy performance over the term.

You can have third party premium financing problems and the collateral, if any, may be
declining in value.

Possible solutions are to use enhanced lifetime gift tax exemptions to mitigate the economic
pressures and solve for future required premiums.

Sometimes you might want to unwind the transaction entirely but must analyze the income
tax consequences and valuation issues.

Other solutions are to modify, decant or terminate the ILIT.

SPECIAL SESSION III-D

Understanding the Practical and Ethical Implications of the FATF
Recommendations as Applied to Lawyers and Accountants; Lessons
from the U.K. Experience
John A. Terrill, II and John Riches
January 17, 2019
ABA Reporter: Dave Slenn

The panelists provided an introduction to the Financial Action Task Force (FATF) and its
objectives (to set standards and promote effective implementation of legal, regulatory and
operational measures for combating money laundering, terrorist financing and other
related threats to the integrity of the international financial system.)
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
163
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The panelists noted how the FATF has developed a series of recommendations that are
used as standards for combating money laundering, financing of terrorism and the
proliferation of weapons of mass destruction. The FATF monitors the progress of its
members (the US is a member.)

After evaluating the US, the FATF issued a report; of the 40 recommendations, the US
was fully compliant in 35. The panelists noted how the US is very compliant with
sharing information among law enforcement, but fall short with some recommendations.
John Riches gave his view on the Recommendations as he is subject to them, while John
(Jack) Terrill contrasted the attorney’s role under US law and ethical rules.

One area involves recommendations dealing with customer due diligence and record-
keeping that apply to designated non-financial businesses and professions (DNFBPs).
Attorneys do not have this obligation. While the US (as a key member of FATF) has
agreed to implement these policies and to apply them to lawyers, and while these policies
do apply to banks and financial institutions under the Bank Secrecy Act and the
PATRIOT Act, the efforts of the ABA and its partners, including ACTEC, have been
crucial in slowing the effort to impose legislative or regulatory customer due diligence
(CDD), suspicious transactions report (STR) and prohibitions on tipping off clients
(NTO) obligations on American lawyers. So a large part of the presentation involved
hearing from one lawyer who is subject to these rules in the UK (John Riches) and
contrasting with one in the US who is not (Jack Terrill.)

Recommendation 23 requires lawyers to report suspicious transactions. While US

bankers spend enormous amount of time doing this, attorneys do not.

John Riches then discussed UK related issues for lawyers, where these obligations are
imposed on lawyers, and noted the tension between reporting suspicions and whether
professional privilege stops him from filing. Other Recommendations require that you
not “tip off” the client as that itself would be a crime to disclose. John mentioned he
starts off his engagements by giving a lecture along the lines of – “before you open your
mouth, there are circumstances where I have obligations to make disclosures.” John noted
only one or two people left.

The contrast with a US lawyer was interesting; imagine having this discussion with your
estate planning client, informing them you will “have to call financial crimes
enforcement network and I can’t tell you why.”

The panelists noted a recent 60 Minutes piece where American lawyers agreed to do
something for a client who is acting for his African family to commit a crime. One of
those lawyers earned a censure after 60 Minutes ran this story. The panelists noted how
the lawyer told the client “nothing happens, lawyers run the country.”

The panelists noted a supplemental item in the materials, which is an opinion issued in
the fall by the City Bar of NYC, which has its own ethics committee. The opinion deals

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
164
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

with a situation where an individual asks a lawyer to assist and lawyer suspects they may
be assisting with a crime. To what extent is the lawyer required to do something? This is
governed by rules of conduct which contain duties and exceptions to duties.
The panelists then posed a hypothetical where a lawyer represented a client with the sale
of a business. Therefore, we have a transactional lawyer assisting with a transaction, and
the client advised that the proceeds would be used to purchase another business, where
payments will go to bank in a notorious secrecy jurisdiction.

The panelists said it is fair to say some jurisdictions have lax banking laws. For example,
Cypress has been a problem. In this hypothetical, the lawyer is not touching any money,
but the client says wire to my account in Cypress. The client then asks lawyer to proceed
with the purchase of new business, and in preparing documents, the lawyer realizes the
purchase price is more than business is worth. The panelists said you should assume that
you can objectively determine the money is going somewhere in secrecy jurisdiction.
Lawyer also learns the client has two passports, each from a different secrecy jurisdiction
different from the jurisdiction where the bank is located. Lawyer suspects -- but does not
know -- that this is a crime of fraud like money laundering or tax evasion.

All these facts show red flags. Jack asked John what he would do. John said you would
identify where the funds were coming from, what the business purpose was, and on these
facts, the first part of transaction looks okay; it’s the sale of existing business, which is
perfectly legitimate. So far, so good.

Then second transaction comes up, a new matter, identify the client, if a new entity,
identify it. But then you need to understand the purpose here; at this point, it starts to
smell fishy because of the secrecy jurisdiction, and another flag on substantial
overpayment. Under rules they discussed in the general session dealing with the offense
of failure to report, this is where you fail, at the earliest opportunity. At this point, based
on this fact pattern, you will be considering carefully filing SAR. The panelists also
stressed not to use your lawyer account – lawyers who get in trouble are people who take
money without carefully analyzing. But even if the funds go to another account, you still
file the SAR. If you suspect but don’t know there is fraud or crime, and if you continue
in transaction and facilitate, that can be a secondary offense, as you could be conspiring
to commit a crime. Question is whether you simultaneously file SAR but also withdraw.
Why take a risk of carrying on when you are helping commit a crime. Filing is not an
exception, fact that you reported doesn’t get you off hook.

The panelists discussed the nuances of not tipping a client off but also disengaging at the
same time.

As a US lawyer, you might be faced with transaction that has red flags or pink flags that
could evolve in a bad direction. We are left with model rules of conduct – and if you
participate in a crime, you could be a co-conspirator and lose your license. But the US
lawyer is subject to ethical rules without a CDD (customer due diligence) obligation.
Instead, you do conflict checks. Jack said he does asset protection and as a result, he has
detailed onboarding procedures. The city bar opinion said you have a duty of

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
165
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

competence, and the only way under rule 1.1 is to know enough about your client and
what they’re doing to properly represent them. So permitting someone to pay three times
more does not seem reasonable and you should ask to help understand why (this could be
a taxable gift.) So the US lawyer, without any English style mandatory due diligence,
perhaps a mere conflict check, is now knee deep into the transaction. So there is inquiry
into the reason for this odd fact pattern.

An audience member who represents financial institutions and does FATCA work
wanted to clarify that having multiple passports is a common situation.

Jack agreed but said that an overpayment is main cause, the other stuff is more “filler”,
and the cumulative effect of information that lawyer is not required to gather ahead of
time, but learns through course, (with no STR requirement and not having CDD
mandatory requirement), requires the lawyer to ask “how far can I go?”

If you need to ask a money launderer “what are you doing”, you run the risk this person
is going to get annoyed. At least the UK system and SAR lets you do evaluation and pass
on responsibility to the government. The additional issue is “what can she say?” Rule 1.6
deals with confidentiality but it has exceptions (states have slight differences) and one
thing they ask is whether the lawyer has the obligation to disclose.

Jack covered the rules that provide a lawyer may or shall reveal communications to
extent lawyer believes necessary to prevent commission of a crime, death or substantial
bodily harm. Admittedly, “committing a crime” is fairly broad. So in NY ‘s version
says, if you have sufficient information to believe you should disclose confidential
information, you are not subject to censure if it is to prevent commission of a crime or
death or bodily harm.

Other issues involved how to withdraw, and a question from the audience about a US
lawyer practicing in London and whether the US lawyer would be subject to offenses in
the UK. Another audience question involved an attendee who attended a lunch sponsored
by a trust company from a particular state that advertises certain favorable laws,
including strict non-disclosure laws. The attendee questioned whether there is an issue if
a client asked to move it to that particular state because of the privacy aspects – would
that create a reasonable suspicion for purposes of reporting. John said if it’s simply a
matter of respecting privacy, and the US is one of a few jurisdictions that stands up for
privacy, that should be fine, so long as no suspicion of avoiding taxes.

There was a question from the audience member who attended a lunch sponsored by a
certain company that touted the secrecy of a certain state. The question was whether that
fact alone would raise red flags. The panelists did not think so, and Jack pointed out the
privacy was for the beneficial interests, not some play on taxes.

Jack predicted that within next half decade, lawyers will need to do client intake the way
banks do.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
166
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

John said the driver in the UK was insurance. Premiums go up. If you do mess up,
malpractice pays. He was surprised US insurers do not request this. The closing message
was we need to be more like our banking colleagues, more conscientious about
onboarding, and if there are issues, the best course of action would be to decline
representation.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
167
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #10

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #10 continues our coverage of the Institute with the remaining reports on the
first group of Thursday afternoon special sessions covering managing difficult
beneficiaries and the essentials of family offices and Fundamental #4, the life cycle of a
charity. Reports #11 and 12 will cover the second group of Thursday afternoon special
sessions. Report #13 will cover the Friday morning sessions. Report #14 will cover some
of the vendors.

FUNDAMENTALS SESSION #4

The Life Cycle of a Donor’s Charity

Thursday, January 17, 2019

Edward J. Beckwith, Martin Hall, and Michele A. W. McKinnon

Fundamental Session Afternoon

ABA Reporter: Mary Elizabeth Anderson

The panelists led the audience through the life of a charity from inception to termination
in five nuanced acts. Each section discussion concluded with the key takeaway planning
points.

I. THE PHILANTHROPIC SPARK.

Ed started the presentation with a statistical breakdown on the different types of donors.
A majority of donors (70%) are individuals, the remaining 30% are made up of bequests
(9%), foundations (16%) and corporations (5%). All of these donors give to a variety of
different philanthropic endeavors: Religion (31%), Education (14%), Human Services
(12%), Grant-Making Foundations (11%), Health (9%), Public Society Benefit (7%),
Arts, Culture and Humanities (5%), International Affairs (6%), Environmental/Animals
(3%), and Individuals (2%).

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
168
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ed then explain the types of people who make charitable gifts – Communitarians,
Investors, Socialites, Altruists, Devouts, Repayers and Dynasts. Understanding the type
of donor helps strategize the types of gifts and planning for gifts. Ed recommends asking
the potential donor “if you could change one thing in the world, what would it be?”

Ed then discussed the different types of giving vehicles and how the nature of the gift, the
type of asset being given and the purpose and intent of the donor may require structuring
the gift differently such that the tax impact may not be the first and definitely should not
be the only thing considered.

The key takeaways to this section are to: (1) develop a philanthropic plan before any gifts
are made, (2) do not jump to conclusions – take the time to talk to the donor and pull out
hidden information about the donor’s intent for the gift, the contributing assets and the
family involvement in the ongoing process, (3) before creating a new entity, research
whether there is an existing entity that can be used, and (4) review the plan to maximize
the tax consequences.

II. GETTING ORGANIZED: PULLING THE PIECES TOGETHER.

This section was led by Michele and she first walked through the basic requirements for
an organization to qualify under §501(c)(3). The entity must be a corporation or any
community chest fund or foundation, organized and operated exclusively (interpret as
primarily) for exempt purposes, without private inurement, and no political campaign
activity or substantial lobbying. Michele then discussed some of the different types of
organizations under §509(a)(1) and the differences between public charities and private
foundations, including deduction limitations for contributions and distribution and
activity restrictions. Michele discussed the process for selecting the charitable entity and
opined that corporations are most typically used when creating a new charitable entity
because state law on corporations is available as governance guidance for the board and
its actions, and corporations offer the most flexible vehicle for changes over time.
However, if the donor does not want to provide for amendments or changes to the
purposes of the charity, then a trust may be a better entity. Michele recommends applying
for §501(c)(3) status early in the entity’s existence because the financial support
calculations are easier and can use projected estimations.

Once the entity type has been determined, the entity must be created – filing articles of
organization, applying for tax identification number, filing for exempt status, issuing
board resolutions and bylaws, and complying with all annual filings for continued
existence. The entity formation documents must contain specific language in order to
qualify the entity as one organized for the purposes of §501(c)(3), distribution directions
for the assets upon dissolution, restrictions on self-dealing and other prohibited activities,
and may contain other board guidance or restrictions if desired.

Michelle then led a discussion using several examples to illustrate how to select the entity
type and type of organization based on the donor’s intent. For example, if the donor
wants to pay members of his or family to help with the charitable organization, then the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
169
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

donor cannot use a donor –advised fund and should look to a private foundation. Ed
opined that the main take away from this discussion is that charities are not places to hire
children. The next example discussed a donor whose main asset was a closely held
business who desired to make future charitable contributions as well as pass some assets
to his children. Both private foundations and donor-advised funds are subject to the
excess business holdings rules, so Martin suggested using a split interest trust such as a
charitable remainder trust to throw off some current income to the children and at the
donor’s death the business can be sold and the charity funded with the sales proceeds.

The panelists also discussed the differences between §501(c)(3) organizations and (c)(4)
organizations. A donor will not receive a charitable deduction for contributions to a
§501(c)(4) but the entity is tax exempt, the assets can be used for all of the same purposes
as a (c)(3) plus this entity can engage in lobbying. The downside of a (c)(4) is that if the
donor retains control of the organization at the donor’s death, then the assets will be
included in his or her estate but the estate will not get an offsetting charitable deduction.

This section’s key takeaways: (1) explore what the donor wants to do in order to
determine what type of entity will work best; (2) think closely about the governance of
the entity; and (3) complete all documentation and filing requirements with full
disclosure.

III. GETTING LAUNCHED: THE OPERATIONAL CHALLENGES.

Martin led the discussion of this section. He recommends that when starting a new
charity the organization should be run like a business rather than a hobby or pet project.
A strong governance structure with policies and procedures should be put into place at
the outset rather than over time after unexpected events pop up. As with any new
business, you should hire competent staff – inside and outside counsel, accountants,
bookkeepers, and board members. You may need to hire a CFO, CEO and HR director.

The organization should develop a mission in writing. Martin recommended discussing

the mission of the organization with the founding donor in depth and over several
conversations because often the founder keeps the organizations true intent tucked away
in his or her head. At the founder’s death or resignation, the organization may suffer from
loss of identity and purpose.

Next, Martin discussed the various types of policies that the organization should have in
order to limit the board’s liability and establish a good board structure with engaged
members. Martin recommended forming committees such as executive committee,
finance committee (to review investments and expenses), grants committee, and
nominating committee.

Martin discussed the investment strategies for an organization and the conversation you
may have to have with a founding donor who has made his or her money through high
risk investments. He also discussed whether the investment strategy of the organization

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
170
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

should match the organization’s mission. For example, should an organization with
environmental purposes invest in certain energy companies?

The key takeaways to this section included (1) setting the mission, (2) establishing a
board structure with written policies, (3) tracking all required filings (federal, state and
local), (4) hiring good counsel, accountants and staff, and (5) grant making is not a
passive activity.

IV. CONFRONTING THE UNEXPECTED.

In this section the presenters engaged the audience in a board meeting role-play exercise.
Ed played the part of the founding donor, Michele the newly hired CEO, and Martin the
organization’s outside counsel. The audience made up the organization’s the board. The
panel presented various fact scenarios throughout the staged board meeting in order to
illustrate the difficulties and liabilities an operating organization may face over time.

In the first set of facts, the newly hired CEO had reviewed the financial statements and
discovered that the organization’s operating cash was gone and the endowment fund is
being used to pay the organization operating expenses. The facts revealed that the board
had not met for several months, both the treasurer and the development officer have
resigned, and the CFO has been making all of the major decisions including financial
distributions and expenditures. The CFO approved an expensive staff retreat and
requested several other unusually high expense reimbursements.

Michele as the CEO expressed a desire to fire the CFO who insisted that all expenses
were valid and acknowledged that the endowment should not have been used but that the
intent was to reimburse the funds once gifting returned to normal.

Martin advised that the organization should not summarily fire the CFO, but instead
follow appropriate employment law procedures, investigate the issues and substantiate
the claims in order to mitigate a lawsuit. In addition, any form of embezzlement must be
disclosed and will be made public. It is the duty of the directors of the board to report
actions to the local district attorney. The duty of loyalty and care to the organization
requires disclosure.

Michele recommended that organizations facing this type of public disclosure may want
to hire a public relations person in order to get in front of the issues and develop a
strategy to distance the organization from the actions of a bad actor. In addition, the
organization should have insurance to cover these types of acts and the board should
document the distributions from the endowment as a loans to be repaid with interest.

If the CFO did take money, the receipt of those funds will trigger an excess benefits
penalty, which the CFO must pay unless he or she reimburses the organization.
Repayment (or a promise thereto) will not prevent reporting of the issue.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
171
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Next the panel discussed facts that lead to a breach and disclosure of the organization’s
data. The panel discussed that the organization should have insurance to cover a data
security breach, its notice and disclosure duties to its donors, and a written
employee/board procedure for handling the use of protected data and the process for
returning and securing all data when an employee or member of the board leaves the
organization.

The key takeaways from this section are to (1) try to anticipate issues, (2) Have a good
loyal staff and engaged board, (3) have outside advisors and conduct periodic audits, (4)
be in full compliance with all rules and regulations and (5) regularly review the mission,
operations and effectiveness of the organization.

V. WINDING DOWN THE FOUNDATION – LEAVING A LEGACY WITH GRACE

AND DIGNITY.

In this final section the panelists discussed the reasons why a charity might reach its
conclusion. The organization could have a set duration that has expired, or a specific
mission that has been accomplished, but more often the organization’s board or
controlling family members no longer feel engaged or cannot work together and decide to
terminate the organization.

The panelists discussed the importance of a “soft landing” when terminating a charity.
Section 507 imposes a termination tax on private foundations unless the terminating
organization transfers all of its assets to one or more public charities that have been in
existence for at least 60 months (5 years) or the terminating organization has no assets at
the time of termination. The public charity can be a donor-advised fund. Some
organizations may be able to declare their dissolution and termination on the final Form
990 but others ((a)(2) or (a)(3)) require additional notice to the Service.

The key takeaways to this section are that (1) nothing is forever and planning the exit
strategy is important, (2) consider whether the organization’s mission has been
accomplished, (3) plan for the soft landing to avoid §507 and the taxable termination, and
(4) if there is a controversy, deadlock or the organization does not know what to do, then
ask the court/arbitrator/mediator for guidance and a resolution.

SPECIAL SESSION III-E

Greasing the Squeaky Wheel: Methods for Managing Difficult

Beneficiaries

Lauren J. Wolven, Christine Graham, and Arden O’Connor

Thursday, January 17, 2019

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
172
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

ABA Reporter: Michael A. Sneeringer

I. INTRODUCTION

Ms. Wolven began with a hypothetical to set the tone for the presentation. Her example
highlighted the story of a person who took too many bipolar drugs and ended up in a
coma. She noted that the person’s spouse was her healthcare decision maker but such
spouse had passed on. The person’s friends are now the healthcare decision makers.
After coming out of the coma, the person now has a substance abuse issue in addition to
the bipolar.

Ms. Wolven indicated that the panelists would discuss not only personality disorders but
also disorders on the autism spectrum. She noted that the panelists would discuss how to
deal with beneficiaries with substance abuse issues.

II. DISCUSSION

Ms. Wolven noted that attorneys are not good at behavioral health. She cited ABA
studies on attorneys’ struggles with substance abuse and depression. She indicated that,
based on this disadvantage, attorneys need to better perceive behavioral problems in
others.

Ms. O’Connor noted that anxiety and depression are on the rise, even in young adults.
She noted that autism is being diagnosed with greater frequency. She discussed that it is
easy to involve many different professionals once a person is diagnosed with a behavioral
health problem. She discussed a situation with a family and daughter having failure-to-
launch syndrome. She described that the key in this situation was helping the daughter to
be more independent.

Ms. Graham noted that her role on the panel was to give the professional fiduciary’s
perspective. She discussed that professional fiduciaries have to think outside the box in
dealing with certain beneficiaries. She indicated that professional fiduciaries may not
know about the behavioral health of beneficiaries until years into the relationship. She
added that it is key to put the right people in place. She noted that the duty of impartiality
can be a challenge when one beneficiary has a behavioral health issue and the other
beneficiaries from the same family do not. She discussed estate planning documents and
their use by attorneys to deal with beneficiaries with behavioral health issues. She added
that there are unreasonable trust provisions with great intentions, that do not work, such
as drug testing or asking the professional fiduciary to make distributions if a “beneficiary
is not gambling” (how can the professional fiduciary determine whether the beneficiary is
gambling or not?).

Ms. Wolven noted that she has changed her estate planning questionnaire following her
presentations in this area by including questions asking if any beneficiaries have behavior
issues. Ms. O’Connor opined that Ms. Wolven’s approach is a good one.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
173
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ms. Wolven noted that long-term drug use changes the brain. She noted that drugs cause
good people to do bad things. She discussed substance abuse language in estate planning
documents. She examined how the terms “substance” and “abuse” should be defined as
within the estate planning documents.

Ms. Graham indicated that boilerplate substance abuse clauses can cause problems,
especially if there are mandatory testing provisions. She noted that professional
fiduciaries do not know how to interpret testing provisions.

Ms. Wolven added that the boilerplate provisions should be edited. She opined that
provisions allowing payments for the benefit of the beneficiary may be best. She added
that choice of fiduciary is important, especially for beneficiaries with behavioral health
issues. She noted that beneficiaries suffer from red bike syndrome (“my sister got a red
bike as a kid and I did not; now that we are older, I want a greater inheritance than her”),
although not all beneficiaries are unsupportive of their siblings struggling with substance
abuse.

Ms. O’Connor said that her brother died of a drug overdose and discussed the role of her
brother in the family dynamic. She indicated that her other brother resented the situation;
her dad was the overly sensitive one; and her mom was the super case-manager. She
highlighted the fact that families end up scrambling for a long period of time with these
issues. These issues are present with family businesses too.

Ms. Wolven discussed how to draft estate planning documents that best address a client’s
family situation. She noted that the hope is to avoid the trust being a vehicle for the
beneficiary to cause further harm to his or her self. She noted that preparing for the worst
is a great rule of thumb and safeguards should be put in place.

Ms. Graham noted that she see lots of documents that attempt to address the issues
previously mentioned. She indicated that drafting flexibility into documents is key. She
opined that provisions for distributions for the benefit of the beneficiary are common, but
she has seen provisions that narrow such distributions to food, rent, treatment and health
insurance when a beneficiary is actively abusing substances. She discussed that
interpreting what was intended is difficult to interpret. She highlighted the situation of
determining whether legal drugs, alcohol and marijuana (in some states), are what the
settlor intended to be banned.

Ms. Wolven discussed the issues of dealing with beneficiaries having undiagnosed autism
spectrum disorders. She described how giving a financial advisor the heads up before
meeting with such client can be key.

Ms. O’Connor discussed how tricky it becomes to deal with beneficiaries or clients who
became successful in their earlier lives but become dependent on drugs and alcohol in
their retirement years. She cautioned about the use of treatment centers due to the
amount of private equity being poured into the industry. She noted that “Googling”

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
174
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

which treatment center is best can cause problems for families with substance abusers as
the amount of patient brokering and advertising for such centers has risen in recent years.

Ms. Graham discussed legal guardianships for beneficiaries with behavior health
problems, such as adults with eating disorders. Ms. O’Connor added that eating disorders
are some of the toughest to treat because the person with such disorder may otherwise
have everything going for them professionally.

III. QUESTIONS

Ms. Graham addressed a question of the use of the term “shall” versus “may”. She
indicated she likes the discretion and flexibility of the term “may” as opposed to shall.
She noted that the use of a non-professional fiduciary co-trustee is beneficial, especially
an individual trustee who knows the beneficiary and the family dynamic. Ms. Wolven
indicated that she uses this “co-trustee” as a distribution advisor as the co-trustee may not
want the liability and responsibility of other trustee functions (such as filing tax returns).
Ms. O’Connor indicated that her company has served as a distribution advisor.

Ms. Graham discussed another question that dealt with beneficiaries who do not have
behavioral health issues but have come into money for the first time. She noted that
having a clear communication strategy in place is key. Ms. Wolven noted that she is not
a proponent of pot trusts. In separate trust situations, the beneficiary focuses on what they
have in their separate trust, instead of the distributions that everyone else took from the
pot trust versus their individual take from the pot trust.

Ms. Wolven noted that sometimes beneficiaries might have to sue and have their date in
court in certain situations (as opposed to constant complaining by the beneficiary).

Ms. Graham said that trust modification may have to occur based on the terms of a trust
instrument and the issues presented by the beneficiaries. She indicated that she has not
had trouble getting terms modified in the jurisdictions she has worked in. Ms. Wolven
noted that a court procedure may be best as opposed to a nonjudicial modification when
there are beneficiaries who will not consent.

IV. CONCLUSION OF PROGRAM AFTER QUESTIONS

Ms. Wolven indicated that for those serving as trustees or advising trustees, they may be
exposed to liability if there is a substance abuse issue and they stick their head in the sand
(as opposed to meeting with the beneficiary). Ms. Wolven noted that there could be
some dram shop-like liability where a trustee makes distributions to a beneficiary and the
beneficiary buys substances and then injures others.

Ms. Graham reminded the crowd that due diligence is key. She stressed knowing
beneficiaries and developing a plan based on that knowledge. She noted that documents
should be modified if they do not provide the necessary flexibility.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
175
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Ms. Wolven observed that attorneys need to get creative in discussing and addressing
these types of issues.

Ms. O’Connor noted that attorneys and advisors need to be prepared because these
situations develop quickly.

SPECIAL SESSION III – F

Essentials of Family Offices for the Estate Planner – A Primer on

Functions, Structures, and Related Issues

N. Todd Angkatavanich, William J. Kambas, and Robert A. Stover, Jr. (Richard L. Dees
was not able to participate on the panel.)

Thursday January 17, 2019

ABA Reporter: Scott Hancock

Part I – Introduction

The panel began the session by describing the development of the “family office”
throughout history. In medieval England, royals appointed a steward to manage
household wealth and staffs. In more modern times, the Rothschild, JP Morgan, and
Rockefeller families instituted “family offices.” In recent years, the amount of private
capital held by the wealthiest families is accelerating, resulting in the term “family
office” coming into vogue. The panel also provided data related to the concentrations of
private capital globally.

The session covered initial factors for success, governance, compensating management,
and generating income and losses.

Part II – Initial Factors for Success

The panel next discussed the need to appropriately plan the family office services and
structure to best meet a particular family’s needs in order to have success.

Family offices may provide any number of services ranging from bill pay and other
concierge services to managing investment, real property, and tangible property
portfolios worth hundreds of millions of dollars. As a result, it is necessary to first
determine the family’s goals and objectives in implementing a family office.

Family office structures may include:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
176
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• A single family office (SFO) dedicated to one family, perhaps with multiple
households and generations.
• A multi-family office (MFO) that is an independent entity that manages the
wealth of several families; it may be a small enterprise, or it could be a division
within a large bank or financial services firm.
• A virtual family office (VFO) that outsources many of its services. This type of
family office may have a few administrative or accounting staff, while
outsourcing investment, legal, accounting, technology, and other services.

Family offices are organized based on the actual services offered, skills of the staff hired,
and desires of the family. The family’s risk profile and the costs to set up and run a
family office should also be considered. The two extremes in family office structure are a
“founder’s office” and a complex, large, multi-generational family office that may be
structured similar to a modern fund consisting of limited partnerships and a limited
liability company serving as the general partner.

It was noted several times throughout the session that estate planning is often an
integrated part of a family office.

Part III – Governance

The panel next discussed governance considerations. It was noted that the success of a
family office is contingent on the cohesiveness of the decision making process.

Practitioners often start the implementation or creation process of an entity structure by

drafting the governing documents. However, the process for a family office structure
should start with an in-depth discussion and analysis of the considerations referred to in
the prior part. In addition, the process should involve the family’s natural form of
governance. This may include considerations as to whether the family functions like a
monarchy, a democracy, or some other form of governance. Often a family office fails
because of the disconnect between the family’s inherent form of governance and the
structure that is implemented with respect to the family office. The initial resulting
product from this process may be similar to a “term sheet”. This process should help to
obtain the needed long-term stickiness and buy-in from the family members from G1,
G2, and G3 as to the structure. After analyzing these considerations, it is time to draft the
legal documents that should also incorporate such considerations and contain terms to
appropriately manage liability, avoid regulatory issues, and otherwise meet the particular
needs of the family, including considerations unique to multi-state and multi-national
families.

The panel also highlighted the following additional benefits of good governance:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
177
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• Family offices can benefit the ongoing maintenance and compliance of business
and estate planning structures currently in place and that are put in place in the
future.
• Family offices can help to fortify business entities by having the rising generation
participate in the business entities in the form of internship or externship
programs that allow the family members to better understand the family enterprise
and perhaps want to participate more actively.
• Family offices can help make sure that the right people are in positions of power
or authority within the trusts and the business entities for governance, taxation,
regulatory, and other relevant purposes.

Part IV – Compensating Management

The panel next discussed aspects related to the compensation of management. The panel
noted that human capital is key to a family office and one of its greatest expenses. In
finding talent, a well thought out job description and benefits/incentives package is
important. Depending on the background of the personnel, co-ownership interests such as
profits interests or other equity interests may make up a part of the compensation
package.

The panel also noted that it takes a unique individual to be able to run a family office.
The head of a family office should have skills and experience in such areas as finance,
tax, and law. In addition, such person should have good interpersonal skills to be able to
work with multiple generations, be able to see the big picture, be nimble and flexible, and
have broad management abilities allowing for the management of basic items
(maintenance contracts) to complex items (private equity investments, private jets, etc.).

Part V – Generating Income and Losses

The panel next discussed tax considerations relating to income and the deductibility of
expenses. The discussion briefly involved income considerations and then focused on the
deductibility of expenses under Sections 162 or 212. The panel noted that under current
law Section 212 expenses are not deductible through 2025.

The panel next provided some case law history regarding decisions involving the ability
of family offices or family office type structures to take a trade or business expense
deduction under Section 162. Whether an activity is a trade or business for purposes of
Section 162 is based on the activity being regular, continuous, and having a profit motive.
Generally, the management of one’s own assets is not a trade or business. In addition, a
cost center is not a trade or business.

The panel next reviewed Lender Management v. Comm’r, which is a recent Tax Court. In
that case, the IRS argued that Lender Management, which was the management entity of
a family office structure, was not allowed to deduct its expenses pursuant to Code Section
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
178
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

212. However, the Tax Court ruled that Lender Management conducted a trade or
business. As a result, Lender Management was entitled to deduct its expenses under Code
Section 162. In the case, the Tax Court noted that Lender Management served a similar
purpose as a general partner in a “fund of funds” investment structure.

Some of the additional factors in Lender Management that were relevant in the favorable
ruling are:

• The owners of Lender Management substantially differed from the owners of the
investment entities.
• Investors could withdraw their investments at any time if they were dissatisfied
with the management services.
• Lender Management had five employees and paid salaries to its employees.
• Lender Management provided investment advisory services and financial
planning services, comparable to hedge fund managers.

The panel noted that notwithstanding the favorable ruling in Lender Management,
families should not go out and put a profits interest in place in a current family entity
structure thinking it will qualify for Code Section 162 deductibility. The panel then
compared the facts and potential analysis of a recently settled case referred to as Hellman
to those in Lender Management. Although the terms of the settlement in Hellman are not
known, the panel seemed to believe the outcome was not as favorable as in Lender
Management.

The panel also referenced other tax considerations such as the potential need to analyze
the proposed Treasury Regulations under Section 707 and the use of a C corporation in
implementing a family office.

The panel concluded the session with a discussion of potential issues under Section 2701
in implementing a family office involving a profits interest that is to be owned by (or in
trust for) junior family members. Although Section 2701 was not necessarily intended to
apply to the transfer of profits interests, it still might. As a result, when implementing a
profits interest structure with ownership in the entity between two generations of family
members, an analysis of Code Section 2701 should be done. Alternative structuring
options may be better in such situations, such as having the senior generation alone own
the family office.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
179
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
180
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #11

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report #11 continues our coverage of the Institute with reports on some of the
second group of Thursday afternoon special sessions, covering IRA problems, planning
with trusts, and recent developments in Florida law. Report # 12 will cover the remainder
of the second group of Thursday afternoon special sessions. Report #13 will cover the
Friday morning sessions. Report #14 will cover some of the vendors.

Special Session IV – A
IRA, thy name is SNAFU
Natalie Choate
Thursday, January 17, 2019
ABA Reporter: Kristin Dittus

IRA planning is reminiscent of playing “Chutes and Ladders;” where mistakes take you
down a chute sliding straight into big problems and this lecture provides the ladders to
get out of trouble. Ms. Choate covered seven of the most common problems and gave six
solutions in this concise and informative presentation.

The most important step to finding the remedy is to identify the mistake that has
occurred. The IRS has three main penalty weapons against taxpayers on IRA problems:

1. 6% on excessive contributions
2. 10% on early withdrawals
3. 50% for missing a required mandatory distribution (RMD)
1. EXCESSIVE CONTRIBUTIONS

Your client finally moved his $1M traditional IRA to a Roth. The first question to your
client should be if he took his required minimum distribution (RMD) for the year. Only
eligible assets can be rolled over and the RMD is not eligible. To be properly done, the
client should first take the RMD, then rollover the remaining assets. The first distribution
to come out is considered the RMD, and the IRS may even consider the entire withdrawal
of $1M as the RMD. If the client's RMD was $50k, the IRS may consider $950k as a

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
181
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

rollover and the $50k as a regular contribution. The next question is if the $50k is an
ineligible contribution. If your client has no earned income, he is not entitled to make a
contribution. Excess contributions are subject to a 6% penalty.

FIX: Withdraw the excess contribution plus any earnings made on the contribution by the
extended due date of your next tax return to avoid the penalty. Corrective distributions
are not subject to the 10% early withdrawal penalty; however, if you miss the deadline
this penalty will apply. The 6% penalty occurs every year until the problem is
corrected. The correction must be made to the same IRA the contribution was made to.

2. ROLLOVERS ARE ONE-AND-DONE PER YEAR

You are only allowed one IRA-to-IRA rollover per each 12 month calendar period. This
is an easily violated rule. A tax on the second rollover may be avoided if the contribution
can be rolled over to a qualified plan (401k). There is no limit on an IRA to plan or plan
to IRA rollover. The only other option would be to roll it into a Roth and pay the
resulting income tax. One of the worst investments for IRA is using a bank CD because
the bank will issue a check to the individual upon the completion of the term which can
create the need for multiple rollovers.

FIX: The best solution to this problem is to NEVER do a rollover, ALWAYS do a

trustee-to-trustee direct transfer.

3. MISSING 60-DAY ROLLOVER DEADLINE

FIX: Some rollovers are entitled to longer deadlines. The simplest fix is if the rollover is
entitled to more time than 60 days. The next step is trying to qualify for a hardship
exception. Once the hardship is over, 30 days is considered a reasonable time to make
the corrections and the taxpayer can self-certify for a number of reasons. These reasons
include: death of a family member, check was lost in the mail, check was lost and never
cashed, the institution put the money in the wrong account, death of the taxpayer, the
taxpayer’s home was destroyed, and the taxpayer was incarcerated. Late received
contributions are now flagged by the institution for review by the IRS. While the
taxpayer may complain about erroneous advice from a financial professional, the IRS
only allows a hardship exemption for this reason about half the time. Taxpayers and the
IRS often have different ideas about what a hardship is. Ms. Choate summarized PLRs
that she has reviewed on hardship waivers in Appendix A of her outline.

4. ROLLING TO THE WRONG ACCOUNT

Only a spouse (and not a child) can rollover an inherited IRA to an existing IRA account.
Financial institutions frequently make mistakes on the funding of retirement accounts.
FIX: If a financial institution rolls an inherited IRA into a child's existing IRA, this can
be resolved by moving the money from the inherited IRA with any earnings it made out
of the child's pre-existing account and moving it into a separate inherited IRA account for
the child.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
182
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Code § 408A(d)(6) provides for the re-characterization of contributions and does not
allow any recharacterization on (1) a rollover or (2) a valid Roth conversion. The
incorrect contribution to the child's account did not violate this code section so it is
acceptable to recharacterize.

5. SELF-DIRECTED IRA INVESTMENTS

These are often non-traditional investments controlled by the taxpayer, where the
taxpayer can be invested in unusual assets such as a hedge fund or apartment building
purchase. Under code § 408, title to IRA assets must be held by a bank as the account
custodian. If the non-traditional investment does not qualify as a bank, the IRA assets
must be removed upon discovery of the problem. Regardless of the investment, it must be
cash that is removed and reinvested into a valid IRA. You cannot swap assets of the same
value in an IRA the way you can with an IDGT.

FIX: This can be fixed this with an IRA rollover.

6. PROHIBITED TRANSACTIONS

An IRA found to have a prohibited transaction will receive the most significant penalty:
disqualification. This can happen more easily with self-directed IRAs. A principal cannot
buy, sell, or lease money – to or from – an IRA and cannot receive compensation from an
IRA.

Prohibited transactions are very successful in curbing abuses that had been found in
private foundations, forbidding any private benefit to an individual or family associated
with the private foundation. IRAs have the exact opposite purpose of a private
foundations, since they are intended for the sole purpose of benefitting the individual and
the family of the IRA owner. These rules do not seem like a natural fit for the
investment. While these rules were largely ignored by the IRS for some time, they have
recently begun litigating these cases with a very high success rate.

File IRS form 5329 stating there is no penalty tax so that it starts the statute of limitations
running. The IRA becomes disqualified at the time of the prohibited transaction. If a
prohibited transaction occurs in 2009, but the taxpayer never claimed the income because
she did not realize a prohibited transaction had occurred and the IRS does not catch this
mistake until after the statute of limitations has run, there is no remedy for the IRS and
the taxpayer has just received the full amount of the IRA without any income tax. A win
for the taxpayer but a risky transaction to attempt intentionally.

7. MISSING A REQUIRED MANDATORY DISTRIBUTION

Code § 401(a)(9) mandates RMDs that must be taken annually upon turning 70½ years
old and there is a 50% penalty if the distribution is not taken on time.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
183
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

FIX: This penalty can be waived for reasonable cause and if reasonable steps are taken to
resolve the problem. In preparing a reasonable cause waiver, explain the reasoning
behind the missed distribution which may include, but is not limited to: distribution from
the wrong account, an overlooked account, illness of the owner, or switching financial
professionals due to geographical move. Participants get a lot of information regarding
RMDs but a beneficiary who inherits the account may not be as aware of RMD deadlines
because there is no requirement that the account administrator provide information on
RMD to a beneficiary.

File IRS form 5329 for each year the RMD was missed. This form can be filed as a stand-
alone form or an attachment to a tax return. Use caution when indicating the RMD
amount missed. Line 54 requests the taxpayer subtract the (amount actually distributed)
from the (amount that was supposed to be distributed) which would often result in the
amount being the full amount that should have been distributed, but this is a trick
question because the number should always be 0 with the letters RC written next to it. RC
indicates "reasonable cause" and you should only subtract the amount if you do not have
a reasonable cause for the missed RMD (meaning you will receive the 50% penalty on
any amount over 0 if written in on this line of the form).

SPECIAL SESSION IV-B

Having Your Cake and Eating It Too
Gideon Rothschild, Jocelyn Margolin Borowsky, and Barry A. Nelson
Thursday, January 17, 2019

ABA Reporter: Michael A. Sneeringer

I. INTRODUCTION

Mr. Rothschild introduced the presentation by indicating that the key in making present gifts
is making those gifts for purposes of giving away the money and then letting interest
compound.

II. GIFT SUITABILITY ANALYSIS – TYPE OF TRUSTS

Mr. Nelson discussed the questions that he typically asks in deciding whether clients should
make gifts. Mr. Nelson discussed his six question gift suitability analysis:

1. To save future Transfer Taxes, would you be willing to make gifts of any
amount of unused Transfer Tax exemption if the gifts can be made free of gift taxes even if
neither you nor your spouse would have access to the funds, regardless of any reversal in
your financial position?
2. To save future Transfer Taxes, would you be willing to make gifts of any
amount of unused Transfer Tax exemption into a trust for your spouse (and possibly your
children) where your spouse and children may receive distributions at the discretion of the
trustee (you will not be a beneficiary or a trustee)? Upon the death of your spouse, the trust

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
184
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

assets will be held exclusively for your children (they will not pass back to you even if you
survive your spouse).

3. To save future Transfer Taxes, would you make gifts of any amount of
unused Transfer Tax exemption into a trust for your spouse (and possibly your children)
where your spouse and children may receive distributions at the discretion of the trustee (you
will not be a beneficiary or trustee)? Upon your spouse’s death, your spouse can decide on
whether all or any portion of the assets in the trust revert into a new trust created by your
spouse for your benefit and in such event, an independent trustee will determine the extent of
distributions to you.
4. To save future Transfer Taxes, would you make gifts of an amount of unused
Transfer Tax exemption into a trust designating your spouse and children as discretionary
beneficiaries but providing that on a predetermined future date, the assets are distributed
outright or in trust for your children if your net worth is at least a specified value? You would
specify the value upon creation of the trust and it would be an amount that you believe would
result in you having sufficient assets outside the trust to provide for you and your spouse for
the rest of your life.
5. To save future Transfer Taxes, would you make gifts into a trust in one of a
number of states that have enacted self-settled asset protection trust legislation (e.g., Alaska,
Delaware, South Dakota, or Nevada) or to a foreign asset protection trust jurisdiction where
you, your spouse, and possibly your children are potential beneficiaries with the
understanding that the IRS may argue that, as a potential trust beneficiary, all trust assets will
be included in your estate upon your death (especially if the trustee has exercised its power to
make regular distributions to you during your lifetime)?
6. If (i) estate tax savings are not a concern because of the higher basic
exclusion amount for you and your spouse, (ii) you are comfortable that your net worth,
when aggregated with your spouse’s net worth, will not exceed the basic exclusion amount
that may be available in the future, understanding that the current basic exclusion amount
could be reduced, and (iii) you want to significantly enhance asset protection planning, would
you transfer significant sums to an inter vivos QTIP trust for your spouse, retaining the right
to such trust assets if your spouse predeceases you? If so, would your spouse consider a
similar, but not identical, gift into a trust for you?

The planning techniques illustrated in Mr. Nelson’s six gift suitability questions were
described in detail during the remainder of the Special Session.

Ms. Borowsky discussed completed gifts to self-settled trusts. She noted that this technique
gives clients access to the funds. She noted that there are downsides to this plan, indicating
that the client-grantor should not take distributions from the trust (or at least not take regular
distributions). She noted that states with domestic asset protection trust (DAPT) legislation
can employ this technique with the added benefit of creditor protection. She discussed the
Uniform Voidable Transactions Act (UVTA) and how it affects DAPTs where the DAPT
jurisdiction has not adopted the UVTA versus if the DAPT jurisdiction has adopted the
UVTA. She noted that the UVTA, like exception creditors, are cracks in the asset protection
armor.

Mr. Rothschild discussed issues that attorneys need to review with their clients to verify that
the trust will not be includible in the grantor’s estate. Ms. Borowsky discussed conflict of

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
185
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

laws issues. Mr. Rothschild discussed whether the gift should be a complete or incomplete
gift.

Mr. Rothschild noted that only one case has allowed protection of a self-settled trust against
creditors. Mr. Rothschild noted that in all of these cases, it is apparent that the cause of
action had already occurred (these are bad fact cases). He discussed that where creditor
protection is a concern, it may be best to not transfer real estate directly into a trust, and
instead transfer the real estate into an entity and then into a trust (the entity serving as a
wrapper for the real estate). He indicated that a foreign asset protection trust should also be
considered. He cautioned that for some clients, transferring assets offshore can be a hard pill
to swallow.

Mr. Nelson discussed the use of a trust protector for creditor protection purposes, including
giving the trust protector the power to add the grantor as a beneficiary of the trust. Mr.
Nelson noted that the use of SLATs is a great idea where the clients do not have tremendous
net worth but want to take advantage of gifting and creditor protection.
Mr. Rothschild discussed SLATs. He indicated his concern is what happens if the spouse has
a testamentary appointment in favor of the grantor-spouse, in accordance with the Relation
Back Doctrine.

Mr. Nelson discussed the Relation Back Doctrine and the use powers of appointment. He
discussed the Wylie case where the determinative question was whether a power of
appointment should have been characterized as an interest in property or merely a mandate or
authority to dispose of property. He noted that the Wylie court concluded that the power of
appointment was an authority to dispose of property and not an interest in property.
Mr. Rothschild discussed non-reciprocal trusts. He noted that he prefers non-reciprocal trusts
for both husband and wife. He indicated that clients creating SLATs and inter vivos QTIP
trusts should create postnuptial agreements.

Mr. Nelson discussed the reciprocal trust doctrine. He discussed divorce and the use of inter
vivos QTIP trusts. He noted the trend of collaborative divorce and how this interplays with
respect to postnuptial agreements prior to creating inter vivos QTIP trusts. Mr. Rothschild
noted that some clients felt burned after 2012 having created trusts to take advantage of the
then estate tax exemption, only for the estate tax exemption to increase a year later. Ms.
Borowsky said that she has seen an uptick in income tax planning after the estate tax
exemption increased, but not a lot of her clients want to plan using the increased estate tax
exemption.

Mr. Nelson opined that he desired the certainty of inter vivos QTIP trusts, especially for his
estate planning clients who are Florida residents. Mr. Rothschild noted that the use of an
inter vivos QTIP trust requires the filing of a gift tax return and a QTIP election on said gift
tax return since it is a completed gift. He added that he has encountered situations where
clients must pay millions of dollars in taxes following the creation of an inter vivos QTIP
trust without the necessary gift tax return filing.

Mr. Nelson discussed planning with QTIP trusts after the predeceased spouse’s death (but
during the surviving spouse’s lifetime). He noted the use of a trust split and renunciation of
QTIP trust assets by the surviving spouse in order to use up the surviving spouse’s lifetime
exemption. Mr. Rothschild noted that he thinks this works. Mr. Rothschild added that
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
186
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

upstream gifts could also be beneficial where gifts are made to a parent or other elderly
person with a short life expectancy where, upon the elderly person’s death, the assets come
back in trust to the original lower-generation donee.

Mr. Nelson discussed how portability fits into this discussion. He noted that he prefers his
clients not split their assets into revocable trusts. Mr. Rothschild indicated that in New York,
with a state estate tax, he prefers that his clients fund their revocable trusts for purposes of
using the exemption. Ms. Borowsky indicated that Delaware has a state statute that aids
clients with transferring tenants by the entirety property trusts, without the necessity of
breaking up the creditor protection advantage of tenants by the entirety. Ms. Borowsky and
Mr. Nelson discussed tenants by the entirety trusts and Ms. Borowsky highlighted their
efficiency under Delaware law.

III. CONCLUSION

Mr. Rothschild described affidavits of solvency and their use. Ms. Borowsky noted that you
do not want clients to give away most of their assets especially if there are creditor issues
looming over the grantor.

Special Session IV-C

What’s Hot in Florida? Recent Developments in Florida Law
Shane Kelley, Elaine Bucher, and Sarah Butters
ABA Reporter: Patrick J. Duffey

The panel explored recent developments in Florida law, including those impacting full-time
and part-time residents, as well as future and prospective residents.

PART I - ELECTIVE SHARE

In 2016, the Florida legislature amended the statutes to provide a clarification that the
elective share is a baseline and not a ceiling. While this clarification was not news to
practitioners, who often advised clients to file an elective claim “when in doubt,” it was in
reaction to a 2016 case that reached the opposite conclusion. In that case, the surviving
spouse filed for the elective share but did not timely withdraw her claim. When the surviving
spouse realized that she would get more under the estate plan, she sought to withdraw her
claim but the court found that she had forfeited the right to withdraw the claim. In response
to that case, the statute was changed to provide that the election by a surviving spouse to take
an elective share will not, in any event, reduce what the spouse receives under the decedent’s
estate plan.

Further changes to Florida elective share law were made in 2017:

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
187
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• Previously, the value of the homestead was not included in the elective share if
owned separately, but it was included if it was owned jointly. Now, the value of
homestead is always included in the elective estate.

• The second change was an extension of time to file the claim.

• The third change related to assets left in trust satisfying the elective share. Among
the technical rules for such a trust to “count” toward satisfaction of the elective share
was the requirement that the trusts include a provision that would permit the
surviving spouse to compel the trustee to make trust property productive. The change
involved adding a “savings” statute which effectively adds such a provision to any
trust that omitted it.
The panel noted that one significant change to the elective share law proposed by the Florida
Bar Real Property Probate and Trust Law Section (“Florida RPPTL Section”) was rejected by
the Florida Legislature: a sliding scale with respect to the elective share amount (currently a
flat 30% amount) based on the length of the marriage. While difficult to tell for sure, the
panel predicted that the sliding scale change might appear in future legislation, depending
upon political developments.

PART II – DECANTING

The panel’s discussion turned to Florida’s decanting statute, which was first passed in 2007.
To modernize the decanting statute, revisions were made effective as of 2018.

• One change was to expand decanting to trusts that have an ascertainable standard for
distributions. In that instance, decanting can only be done by an “authorized trustee”
(neither a settlor nor a beneficiary) and the new trust must be “substantially similar”
to the old trust, which means that there can be no material changes to the dispositive
provisions of the trust, including powers of appointment.

• Where the trustee’s distribution discretion is not limited by an ascertainable standard,

another change to the statute provides that the second trust may omit, create, or
modify a power of appointment.

• A special provision was added for special needs trusts, which permits decanting
without regard to the distribution standards of those trust. Another change to the
statute related to tax provisions.

• Previously, certain tax benefits had to be maintained in the second trust; the new
legislation expanded the list of tax benefits that had to be preserved.

• Finally, the new statute expressly permits decanting from non-grantor to grantor trust,
provided that the second trust must include a provision to permit the grantor to opt-
out of the grantor trust status.
PART III - SETTLOR’S INTENT

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
188
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Next, the panel discussed changes to a series of statutes that collectively clarified the
importance of settlor intent over the interests of trust beneficiaries. Ms. Butters commented
that she often told her law school trust & estates class that “settlor’s intent means the freedom
to be an SOB”. There is an inherent tension between what the settlor wants and what the
beneficiaries want. When the Uniform Trust Code was revised in 2000, an ostensibly
innocuous provision was added to trustee duties that required the trustee (mandatory not
default) to administer the trust “for the benefit of the beneficiaries.” Certain academics,
including those who helped to add that provision to the UTC, argued that the provision tied
the hands of the trustee and required the trustee to put beneficiaries’ interests above settlor’s
intent. Other states, including New Hampshire and Ohio, passed legislation to ensure that
settlor’s intent was paramount. This legislative fix was drafted to eliminate the mandatory
aspect of the so-called benefit-of-the-beneficiary rule. As long as it is not illegal, not
contrary to public policy, or impossible to accomplish, the settlor is free to draft trust
provisions as he or she wishes.

PART IV - HOMESTEAD WAIVERS

Another recent change related to homestead waivers. Florida has a statute that deals with
how a person may waive their spousal rights in homestead through a prenuptial or postnuptial
agreement. If a person is in compliance with that statute, that person can still waive his or
her homestead rights that way. But certain lifetime issues were popping up and attorneys and
title companies were looking for a way to waive those rights in a deed. The Florida RPPTL
Section drafted a statute providing safe harbor language to waive homestead rights via deed,
which was passed by the Florida Legislature.

PART V - ELDER ABUSE

The panel next discussed the newly added statutes relating to elder abuse injunctions. While,
for years there were civil and criminal remedies for exploitations of vulnerable persons, those
remedies are often time consuming and significant (and sometimes irreparable) damage can
be done in the interim. The new statute was designed to combat that issue and takes an
approach somewhat similar to domestic abuse injunctions. If granted, the elder abuse
injunction provides preventative injunctive relief to freeze bank accounts, lines of credit, and
other assets as well as removing the alleged exploiter out of the home of the vulnerable adult.
Thus, the injunction is designed to work with the existing remedies. The panel noted that it is
only a fifteen day injunction, after which the accused can present their evidence.

PART VI - MISCELLANEOUS CASE LAW UPDATES

The discussion concluded with an extensive case law update covering topics including
homestead, probate procedure, trusts law, and marriage.

• Lane v. Cunnifee addressed the homestead creditor exemption. In that case the
owner of the homestead contracted for sale of property and breached the sales
contract. The court found that to get the protection for sale proceeds it requires three
things: (1) prior to and at the time of the sale, there must be a subjective intent of the
owner to invest the proceeds in a new homestead, (2) the proceeds must be kept
separate for the sole purpose of acquiring another homestead and cannot be used for

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
189
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

another purpose, (3) the funds must not be comingled. The evidentiary standard is
preponderance of the evidence.

• In JBK Associates, Inc. v. Still Bros, Inc., the homeowner sold his home and placed
the proceeds into an account titled “homestead funds.” The funds were invested in
bonds and other conservative investments. A creditor tried to attach the funds on the
basis that they were invested and not held in cash. The Florida Supreme Court found
that there was no requirement that the proceeds be kept in cash.

• In Hilgendorf v. Coleman, the question was whether a trust accounting was owed for
a revocable trust while the settlor was still alive. The panel opined that Florida courts
have come up with inconsistent positions. Here, the court found that there was no
duty to account to the remainder beneficiaries while the settlor was still alive and
there is no duty to do provide a retroactive accounting once the trust became
irrevocable unless there is a claim of a breach of trust during the settlor’s lifetime.

• Kelly v. Lindenau dealt with the Florida trust reformation statute. While liberal, the
panel warned that the statute is not a panacea. In this case, a trust amendment was
drafted for a Florida resident by his former attorney, who practiced in Illinois. The
problem was that there was only one attesting witness to the amendment. The court
found that improper execution was not a valid ground for reformation in Florida and
found that the amendment was, therefore, invalidly executed.

• Another case dealt with a Florida statute—common in other states—that works to

disinherit divorced spouses from pre-existing documents while preserving the
remaining provisions of those documents (where possible). In Gordan v. Fishman,
the decedent was engaged to his future spouse, but not yet married, at the time the
will was executed. The two were subsequently married and later divorced. The
decedent never revised his will. At his death, the decedent’s parents sought to
enforce the divorced spouse statute to disinherit the former spouse. But on appeal,
the court found that the statute did not apply because the decedent was engaged but
not married at the time of the will. The panel noted that while the set of facts is
probably not common, a statutory fix may be appropriate.
====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE
Section's Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute.
If you missed a report, please check the above website or the ABA-PTL archives at the
link at the bottom.
The Reports from 2000 to 2018 can now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
190
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
191
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #12

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

Report # 12 will cover the remainder of the second group of Thursday afternoon special
sessions on disclaimers and international planning. Report #13 will cover the Friday
morning sessions. Report #14 will cover some of the vendors.

SPECIAL SESSION IV-D

Playing the Disclaim Game (Accessing Optionality in Planning and
Problem-Solving)
Miriam Wogan Henry; Kim Kamin; Daniel S. Rubin
Thursday, January 17, 2019
ABA Reporter: Joanne Hindel

Case Study #1, Plain Vanilla Disclaimers

A widower dies with a modest estate and a simple will leaving his assets to his three
children, one of whom is wealthy. That child wishes to disclaim.

Disclaimers come up at hard times for people – when they have lost a loved one.
Disclaimer is a renunciation of your own legal rights and claims. Two tracks – federal tax
implications and state law requirements. They are used to develop flexibility, to defer
decisions, and to address tax ramifications.

Fundamental rules for federal disclaimers under Section 2518: in writing, received by the
transferor within nine months, the disclaimant must not have accepted any benefits, and
the interest must pass without any direction.

If the disclaiming child wants his share to go to his children, will this occur under the
will’s provisions? The disclaiming child cannot direct where the property will go and if
the will provides for the assets to go to the testator’s three children, then the disclaiming
child will be considered pre-deceased and the assets will pass to the other two remaining
children not the children of the disclaiming child.

Note also that the predeceased ancestor rule does not apply to disclaimed assets so GST
taxes may be a factor when disclaiming.
Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
192
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Case Study #2, Retirement Benefits

Same facts as above – third child does not want any assets and assume that decedent had
an IRA that was to be distributed to all three children.

Recognize that the IRA passes outside of the estate assets – its distribution is based upon
the beneficiary designation for the IRA. IRA custodians may provide default distributions
if the designation does not provide for contingent beneficiaries.

Disclaiming in order to allow a retirement account to pass to a younger beneficiary can

allow for a long stretch for retirement distributions. If the disclaimer passes the benefits
down to a younger person in a form that allows the beneficiary to take the payments over
his/her life expectancy, the beneficiary will enjoy an extended payout period to defer the
recognition of income.

Additional complications can arise if the distribution is to a trust.

Subtle distinctions in the beneficiary designation can determine the contingent

beneficiaries – contrast “equally to my three children” with “one-third to each of my
children”.

The goal for planners is to create options so how one completes the beneficiary
designation is critical to develop that flexibility. Often the best is to leave the IRA to the
revocable trust of the IRA owner with the contingent beneficiaries being the descendants
per stirpes.

Case Study #3, Outright to the Surviving Spouse

Assume married clients have $10 million and the planner has structured the plan so that
all assets go to the spouse at death. What if the exemption amount is lower on the death
of the first spouse?

The will/revocable trust can include a provision that any assets disclaimed by the spouse
will pass to a family trust in which the spouse has an income interest for life and from
which the spouse may receive principal to use the deceased spouse’s estate tax exemption
if necessary.

Be careful that the spouse cannot direct what happens to the disclaimed assets once they
pass to the family trust – she may have to disclaim that authority as well.
Consider also whether the surviving spouse will be willing to disclaim in order to save
taxes – the decision will likely be made many years later.

Case Study #4 Disclaimer Planning in Trusts

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
193
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

What if similar facts to #3 but instead of an outright distribution to the spouse, the plan is
designed to go to a Single Fund QTIP and wife as trustee of the QTIP wants to disclaim
all or a portion of the assets into a credit shelter trust?

Make sure that the trust authorizes the trustee to disclaim and that the family trust does
not give the surviving spouse a power of appointment over disclaimed property. The
spouse may be able to have a power of appointment if limited by an ascertainable
standard.

If the client is considering a plan that relies on an outright gift to the surviving spouse
with an option to disclaim to a family trust, consider the “Clayton” QTIP as an
alternative.

Case Study #5 Disclaiming Severable Interests

Assume Dad’s will left property to a trust for Wife and Daughter as income beneficiaries
with discretionary distributions to either Wife or Daughter allowed for lifetime of Wife
and Daughter. Daughter has a taxable estate and dose not want the assets distributed to
her estate but does not want to fully disclaim since she wants the option to receive
distributions during her lifetime.

Can daughter disclaim the vested principal interest while retaining the right to income for
life?

Treasury Regulation Section 25.2518-3 governs the disclaimer of less than an entire
interest in property. Qualified disclaimers of an undivided portion of a separate interest in
property are permissible, even if the disclaiming person has another separate interest in
the same property.

It is permissible to disclaim an income interest for life in an asset or a trust while

retaining the remainder interest in the same asset or trust. It is also permissible to
disclaim the remainder interest and retain the income interest. It is impermissible to
disclaim an income interest for a term of years.

Case Study #6, Creditor Problems

Mom dies unexpectedly leaving an intestate estate. Son is married with one adult child
and is Mom’s sole heir. Son has significant debt – his business is failing, his marriage is
failing, and he has not paid income taxes for several years. Can Son disclaim in order to
avoid having the property go to his future ex-wife, his business lenders, and the
state/federal governments on their tax liens?

Disclaimers can be advantageous from an asset protection perspective because an

effective disclaimer results in the disclaimant being deemed to have never obtained an
interest in the disclaimed property. Due to the “relation back doctrine”, creditors of the
disclaimant and his estate have no claim against or right in the disclaimed property.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
194
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Several states have enacted legislation that prevents a valid disclaimer under certain
circumstances, such as the disclaimant’s existing insolvency. The Supreme Court of the
United States has determined that disclaimed property can be reached by the federal
government in satisfaction of federal tax liens against a disclaimant, even where the
disclaimer is valid under substantive state law.

Case Study #7, Charitable Planning

Client would like her revocable trust to divide assets into shares for each of her two
children, per stirpes, to be held in trust. The ultimate contingent beneficiary of the trust
should be the family’s Private Foundation. Client would like children to have the option
to disclaim assets in favor of the charity to reduce estate taxes.

Settlors may direct that disclaimed assets will pass to a charitable fund to be controlled
by their descendants. A settlor may direct that any disclaimed assets will pass to a
charitable fund, such as a donor advised fund at a public charity or a p
rivate foundation, for the client’s family to use to carry out charitable giving intentions.
A disclaimer will not be a qualified disclaimer if the disclaimant has the power to direct
the distribution of the property, yet often a client will want the disclaimed funds to pass
to a family private foundation.

Case Study #8, Disclaimers on Behalf of Incapacitated Individuals

A disabled, incapacitated child of divorced parents will lose her Medicaid benefits if she
inherits from her estranged father. Can someone disclaim on behalf of the disabled,
incapacitated individual?

The issue revolves around the fiduciary duty of the guardian or personal representative
for the incapacitated individual – is it in the best interests of that person for the guardian
to disclaim their property interest?

Medicaid rules provide that if a person disclaims assets, they will still be considered for
eligibility purposes. A better approach would be to ask a court to authorize the
distribution of the assets to a Special Needs trust for the beneficiary.

Special Session 4-E

International Update: Relevant Legal Developments from Outside the
United States

Presenters: Michael Rosen-Prinz, Mark Barmes and Akane R. Suzuki

Thursday, January 17, 2019

ABA Reporter: Edwin P. Morrow III

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
195
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

The focus of this special session was on international issues. The panel started with a
discussion on beneficial ownership registries, a topic introduced in the related General
Session on Thursday Morning, The War on Money Laundering.

The Rise of Beneficial Ownership Registries Abroad

Back history: A French court had invalidated a prior law that required public online
disclosure of family information as well as basic ownership, but they will probably bring
back a different version. Clients in Europe do not like these beneficial ownership
registries at all. The OECD is battling “asymmetric information gap” – governments are
trying to compensate for clients hiding wealth abroad. Japan has signed onto this
G7/OECD initiative, but has not established any registry yet.

In 2015, the European Union promulgated its Fourth Anti-Money Laundering Directive,
but soon after, the EU had terrorist attacks and the Panama papers scandal that
highlighted flaws in the financial, anti-money laundering and tax systems. Thus, in 2018,
further amendments (Fifth Directive) were recently enacted and will go online in 2020.

There is also a “People with Significant Control” Registry. The EU is not only concerned
with who owns property, but also who has significant control over properties/companies.
Some of the popular press will refer to these as “company registries”, but the rules
encompass trusts as well.

Mr. Barnes noted that who needs to be named in these registries is sometimes a “Chinese
puzzle”. The UK has introduced a “trust register” – you must report not only a UK trust,
but also foreign trusts.

The US lags behind the EU in such creating any such directories but “FinCEN,” (a part of
the Department of the Treasury) now requires U.S. financial institutions to determine the
natural persons who are the direct or indirect “beneficial” owners of entities that open
new accounts after May 11, 2018.

Foreign Account Tax Compliance Act (“FATCA”) and Common Reporting Standard
(“CRS”)

In 2010, FATCA passed in U.S., and required withholding on foreign accounts. FATCA
defined a “foreign financial institution” very broadly to pick up not only banks but also
custodians, collective investment funds, and investment companies. A trust can also be a
“financial institution” if it holds financial assets and is professionally managed.
The Swiss are cooperating with US and other authorities. Information from 7,000
institutions and 2 million accounts were shared with other countries. The Swiss in return
received information on over a million accounts from other countries.

Responses to Increased Government Scrutiny

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
196
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Japan is one of the highest tax jurisdictions with 55% inheritance/estate tax rates (and no
step up in basis at death). They have recently added a 10-year tail to combat citizens
trying to move away temporarily to avoid tax and make gifts while out of the country.
These changes caught foreign expats in their net as well. E.g. foreigner lives and works
in Japan and inherits money – the foreigner may have to pay Japanese inheritance tax;
however, foreign nationals on temporary visas have now been exempted from much of
this, delayed until 2020.

There is a movement among the wealthy in Europe to move to Monaco, Montenegro,

Portugal, etc. Some countries (Germany, Holland) have initiated exit taxes similar to the
U.S. expatriation tax (e.g., triggering capital gains on exit) to combat this.

Golden Visas and Exit Taxes

Malta and other countries would easily grant visas for a price and this is likely to be
curbed. British Columbia started a 20% tax to combat wealthy foreigners driving up
property prices without even living there. Some countries have vacancy taxes to combat
the same problem.

Recent Developments

In January 2019, new EU rules came online to tax profits of companies in tax haven
countries that generate their profits in the EU.

Succession and Inheritance Issues

Using a revocable living trust is extremely problematic in Japan, even though they do
recognize the legality of trusts. It is theoretically possible to own accounts in trust name
there, but they are unknown as a practical matter. Switzerland has over $1 trillion in
trusts/foundations and caters to trusts, having signed onto the Hague convention. But
there are still issues due to being a civil law country– owning Swiss real estate in trust is
complicated.

In 2015, EU succession rules were enacted that focus on the law of “habitual residence”
and allow people to elect to use their own nation’s succession laws for property. One
case involved a Polish national who wanted to use a Polish form of succession for
German property and the court upheld the ability to use Polish law. In another case, a
French national received a certificate (similar to what a US probate court might issue to a
beneficiary) and took it to Germany to change title, they balked, but the court ultimately
upheld this.

EU General Data Protection Regulation (“GDPR”)

GDPR is a EU law on data protection and privacy for all individuals within the European
Union and part of rules and regulations on data protection/digital assets/privacy. It
affects US parent companies doing business in Europe. For example, if a US law firm

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
197
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

offers services in Europe, it should comply with GDPR on its website, email newsletters,
etc. Clients must get description of what data is collected and how it is used and receive
knowledge of their rights. If asked, companies must provide requested data within 30
days.

Conclusion

There is a clear worldwide trend towards more open financial disclosure and greater
compliance. This burden will extend beyond owners and financial institutions and to
attorneys.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
If you missed a report, please check the above website or the ABA-PTL archives at the
link below.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
198
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #13

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report # 13 is the final report on the 53rd Annual Heckerling Institute. It covers the
Friday morning sessions on required minimum distributions, engagement letters, and a
summary of the Institute. Report #14 will include our vendor coverage.

GENERAL SESSION 15
Life Before And After Death With The Minimum Distribution Trust
Rules
Natalie B. Choate
Friday, January 18, 2019
ABA Reporter: Joanne Hindel

The presentation focused on the evolving RMD trust rules – how fast are the retirement
benefits going to have be distributed when transferred to a trust.

When death occurs, IRA funds must be distributed over a beneficiary’s life expectancy.
Part I – Drafting; Accounting; Transfers; Trusteed IRAs

Since 2001/2002, the IRS allows a trust to be a beneficiary. If the trust fits the IRS rules,
the trust can use the life expectancy of the oldest beneficiary.

Part II – The Minimum Distribution Trust Rules

There are two types of trusts that are accepted by the IRS to receive IRA proceeds:

1. Conduit trust- a trust under which everything from the IRA must go to the
beneficiary over the life expectancy of that beneficiary – safest of safe harbors
2. Accumulation trust – trustee has power to take distributions from the IRA and
retain them in the trust – might or might not qualify as a see-through trust
Accumulation trusts will qualify as a see-through trust if the first beneficiary has a right
to trust assets during that beneficiary’s life and a second beneficiary has a right to the
assets only after the death of the prior beneficiary. Both beneficiaries will be taken into

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
199
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

account and the oldest beneficiary’s life expectancy will be the measuring life for
distribution of IRA proceeds.

Part III – RMD Trust Rules

In 2016, the IRS changed the rules with PLR 2016-33025. The fact pattern was to pay
funds from trust to daughter until age 50 at which time trust was fully distributable to
daughter. If the daughter died before age 50, the trust was to continue for the benefit of
her children until they reached age 21. If one of the grandchildren died before age 21,
then her funds would go to her estate. If both grandchildren died before age 21 then trust
was to be distributed to the daughter’s siblings.

Under prior Revenue Rulings this trust would not qualify as an accumulation trust
because an estate is not a beneficiary whose life can be measured for IRA fund
distribution. Since one of the grandchildren’s estates might become a beneficiary, the
trust would not qualify as an accumulation trust.

However, the IRS determined that the daughter and her two children were the
beneficiaries of this trust and the daughter, as the oldest beneficiary, will be the
measuring life for purposes of payout of the IRA. The IRS chose to ignore the possibility
of an estate inheriting some part of the trust.

Natalie Choate believes that earlier personnel who were involved with drafting the
regulations have all retired and new people are now writing the rulings and that is why
this ruling differs from prior rulings.

Another possible difference is the fact that the grandchildren were all under age 21 and in
prior rulings the more remote beneficiaries were not under age 21.

Key planning consideration: if you have a client that has died and the planning does not
fit squarely into the accumulation trust qualifications – don’t despair. You may still get a
favorable Private Letter Ruling.

Part IV- Estate Planning Choices

Natalie then discussed an example of a family with three children – one of whom is
disabled and who receives means-tested benefits. Parents want to leave their IRA to help
their disabled daughter and therefore want to leave the IRA to a trust. They can’t leave
the IRA to a conduit trust but can an accumulation trust be used? Yes, if they provide in
the trust that the IRA can be accumulated in the trust and at the death of the daughter, the
trust goes outright to the siblings of the daughter. The trustee will use the trust for
disabled daughter’s needs but otherwise will hold IRA funds in the trust. By retaining the
income in the trust, this will mean that the trust income will generally be taxed at the
highest tax rate.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
200
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

However, it is possible that the parents may want to take distributions from the IRA or
convert it to a Roth IRA.

Also consider a Qualified disability trust in which a portion of the trust’s otherwise
taxable income may be tax exempt.

If the client wants some of the IRA to go to charity, another planning suggestion from
Natalie was to name a Donor Advised Fund (DAF) as the beneficiary rather than naming
charities directly as beneficiaries. The intended charities can then be named as the
beneficiaries of DAF. This can avoid problems for the charitable beneficiaries because
some IRA custodians will not pay the funds directly to the named charity. Instead, they
require charities to open an inherited IRA account and then take a distribution of the
funds. In addition, it may be easier to change beneficiaries with a DAF. This may also
make it easier to change the charitable beneficiaries.

Another possibility is to consider leaving the benefits to a Charitable Remainder Trust

rather than to the client’s regular taxable family trust.

GENERAL SESSION 16
Living in a Statistical Universe: Embracing the Art and Ethics of the
Engagement Letter
Lauren Wolven
Friday, January 18, 2019
ABA Reporter: Kristin Dittus

Ms. Wolven packed a lot of information and case references into this 50-minute talk on
the artful craft of drafting an engagement letter to protect you based on the work agreed
to. Any reference to letter will be to the engagement letter unless otherwise noted.

Statistically speaking, the longer you practice, the greater your chances of encountering a
contentious client or related party who may sue you. Not only does the engagement letter
set forth what you and the client agree to, it helps you and the client start the relationship
on a better foundation by setting the rules and expectations of the representation. You
cannot prevent someone from bringing an action against you, but you may be able to get
it dismissed very quickly with the proper language in your letter.

GET THE ENGAGEMENT LETTER SIGNED

In Leighton v. Forester, the attorney sent a letter, but told the client he could approve of
the terms by an email rather than sign the letter. Upon the client's death the attorney was
assisting the client’s widow who never hired her nor did she sign an engagement letter.
With the death of a client, a new letter should have been signed. The attorney withdrew
from representation and closed her practice, but then 4 years later filed a complaint

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
201
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

against the widow for breach of written attorney fees contract even though there was no
signed letter and it was two years past the statute of limitation (SOL) to bring such an
action. Not surprisingly, the attorney lost. Be consistent and have all of your clients sign
the letter.

REPRESENTATION OF MULTIPLE PEOPLE REQUIRES A WAIVER OF

CONFLICT

Bishop v. Maurer: Husband sued his lawyer for not perceiving a conflict of interest
between him and his estranged spouse. The letter had each spouse acknowledge they had
the option to hire independent legal counsel and waive any conflict of interest. The
attorney prevailed.

LIMIT THE SCOPE OF LIABILITY

In the Davidson case, a large estate brought an action against Deloitte Tax LLP six years
after the decedent's death for reimbursement of estate taxes owed to the IRS where
Deloitte was assisting in the administration. The action was dismissed because Deloitte
had included a limitation preventing either party from bringing an action more than one
year after the cause of action had accrued and indicated nothing could toll the time
period. Appendix A includes state law regarding SOL limitations, many with references
to model rule 1.8. States generally require the client to be independently represented
when agreeing to a shorter SOL, which is often not practical but could be beneficial if
dealing with a very complex legal representation.

DEFINING AND LIMITING THE SCOPE OF ENGAGEMENT

Courts give significant deference to letters clearly defining the representation. If a firm is
handling a complex estate or tax transaction and not planning on filing any tax returns, it
should indicate that in the letter. If an attorney is notifying beneficiaries of representation
of the PR, include that the attorney’s representation does not extend to beneficiaries of
the estates and the attorney cannot give beneficiaries legal advice.

Attorney Tigani was asked to prepare a testamentary trust for an extremely ill client
making gifts to grandchildren. The attorney indicated there has not been time to do a
review of financial assets and he was preparing the Trust according to the client's
instructions. When a disgruntled beneficiary sued because restrictions on the assets
caused funding problems, the attorney's letter successfully protected him.

AGENCY

If an attorney or firm enters an agreement with another firm for work done on behalf of a
client, make it clear that the client will be the sole party responsible for paying the bill.

IMPORTANT PRACTICE MANAGEMENT TIPS

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
202
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

• -Have a system for tracking outgoing mail so you can prove the bill was sent to the
client.
• -Send a termination letter to be clear if you decide not to represent a client, or if the
client is unresponsive after the initial engagement
• The death of a client changes the relationship and a new letter should be signed by the
new responsible party
• Have a conflict checking system in place for current and potential clients

CONFIDENTIALITY AND CONFLICTS OF INTEREST

When representing more than one party, there is a choice to share all confidences or agree
that no confidences will be shared among the parties. There are typically no secrets
between spouses in a representation. When representing multiple generations of the same
family, however, the "priestly" approach may be better. In this case, clarify you will keep
matters private as to each party and do not have an obligation to share information
between them.

EXTERNAL ADVISORS AND PRIVILEGE

Under Kovel, a non-attorney tax advisor was part of a confidential meeting and refused to
discuss information exchanged in court. The Second Circuit equated this type of specialty
advisement by an expert as that of a translator and upheld the confidential
communication. Have the advisor sign a letter acknowledging that matters discussed will
be kept confidential. Additionally, it is likely this will only apply for "translator type"
services, meaning the expert was necessary and the attorney is not proficient in the area.

WE SAW. WE HEARD. WE READ. WE LEARNED.

Turney P. Berry and Charles A. “Clary” Redd

Friday morning, January 18, 2019

ABA Reporter: Michael A. Sneeringer

I. INTRODUCTION

Mr. Berry noted that this would not be a top 10 or news of the weird presentation. He
noted that if you wanted a news of the weird, Google it: you will find that a fellow in
Pennsylvania has an alligator as a support animal.

II. Q&A PANEL

Further reflection since the Q&A panel on Wednesday necessitated Mr. Redd discussing
new subsection 67(g) (seeking to suspend until January 1, 2026 the deduction for
miscellaneous itemized deductions). He discussed how this interplays with nongrantor
trusts and estates. He discussed Notice 2018-61 related to the Department of the
Treasury (Treasury Department) and the Internal Revenue Service (IRS) intending to

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
203
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

issue regulations providing clarification of the effect of newly enacted section 67(g) of
the Internal Revenue Code (Code) on the deductibility of certain expenses described in
section 67(b) and (e) and §1.67-4 of the Income Tax Regulations that are incurred by
estates and non-grantor trusts.

III. RECENT DEVELOPMENTS

The most significant recent development according to Mr. Berry is the Supreme Court’s
review of the state income taxation of trusts. He indicated that this will generate work for
all estate planning attorneys. He noted that states could change their laws related to the
taxation of trusts.

IV. SECTIONS 1202 AND 199A

Mr. Berry noted that estate planning attorneys think these are hard since they are new, but
added that it will get easier for estate planning attorneys.

Mr. Redd discussed Section 1202. He indicated that Paul Lee had reinforced that there
are a lot of planning opportunities available to estate planning attorneys because of the
reduction of the corporate tax rate from 35% to 21%.

V. STATISTICS

Mr. Berry discussed Hugh MaGill’s presentation, adding that 42% of the population does
not have a will.

VI. CHARITABLE PLANNING

A new idea that Mr. Berry liked was talking about leaving IRD and IRAs to charitable
trusts. He liked Christopher Hoyt’s idea of putting a disposition in a client’s Will
regarding money that the client would have paid income tax on (IRD) and instead giving
that amount to charity. The problem with this idea Mr. Berry noted is that attorneys have
to rethink their forms.

VII. DIVORCE

The complications for divorce following the Tax Act’s passage were discussed by Mr.
Berry. He suggested thinking about this in a few contexts: reviewing pre and post nuptial
agreements with respect to alimony; and reviewing trusts where spouses are involved
(can you cut off the spousal linkage?). Mr. Berry discussed Carlyn S. McCaffrey’s idea
of using a partnership freeze to benefit children in the divorce context (where spouses
were the beneficiaries of trusts). Marital agreements have been affected in a very serious
way according to Mr. Redd, especially the severability provisions.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
204
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

VIII. FIDUCIARY SELECTION

Mr. Berry thought the workload of the trust officer should be a consideration, but Mr.
Redd was not so convinced that this is a big issue, especially because some trust officers
might have a lot of accounts but such accounts may not require a lot of attention by the
trust officer.

IX. PLRs

Mr. Berry touted Julie Kwon’s materials, especially if you do not prepare a lot of PLRs.
Mr. Redd highlighted each year’s first revenue procedure as a necessity for review by
attorneys who practice in this area. He discussed that it might not be worth tipping the
IRS off on what planning technique you would like to do (plus paying the user fee).

X. GUARDIANS AND MINORS

Mr. Berry reminded the audience that creditors can reach a minor’s UTMA account. The
problem of a minor turning 18 as discussed and the solutions that Mr. Berry liked
(contributing money into a 529 Plan or rolling the money into an LLC). But rolling the
money into an LLC could lead to a lawsuit according to Mr. Berry. Mr. Redd has used
the strategy of mentioning to the beneficiary that he or she should contribute the money
into an irrevocable trust, combined with the threat to a future inheritance.

XI. ELDER LAW

Mr. Berry reminded the audience that a revocable trust and testamentary trust can cause
problems for Medicaid planning purposes and surviving spouses.

XII. OFFSHORE PLANNING

Not everyone agrees in this area according to Mr. Berry. Having multiple Wills is one
point of disagreement as Gideon Rothschild prefers one Will and Michelle Graham
prefers two Wills. But Mr. Redd cautioned that the Wills need to match.

XIII. KNOW YOUR CLIENT

Knowing the client was highlighedt during Jack Terrill’s presentation and Mr. Redd
agreed that this was important. Mr. Redd discussed a New York bar opinion.

XIV. DISCLAIMERS

One of Mr. Berry’s favorite ideas is the disclaimer to a charitable fund. He noted that a
disclaimer to a private foundation is a big hassle; why not use a disclaimer to a donor
advised fund instead.

XV. LIFE INSURANCE

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
205
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Mary Ann Mancini’s presentation was noted because attorneys doing life insurance
planning wait for more guidance on split dollar related issues, including intergenerational
split dollar.

XVI. ENGAGEMENT LETTERS

Unlike accountants, attorneys cannot limit their liability to clients. Mr. Berry joked that
he should have become a CPA.

XVII. VALUATION LITIGATION

John Porter is the “Platinum Standard” (not the gold standard). . . according to John
Porter (joked Mr. Berry). Mr. Redd noted the idea of getting alternative appraisals so that
you are are not stuck with the government’s appraisal. He added that actual shares after a
client’s death should be reviewed (Post death developments can be important and need to
be examined. -- what was the cause? Did your appraisal discuss post death
developments? Did you read what your appraiser wrote?). Mr. Redd recommends the use
of formula clauses.

XVIII. FIDUCIARY ETHICS

A client gave a residence to his three children. The three children signed a deed but told
the attorney not to record it. But the transfer was complete for applicable state law. One
of the children died owing the IRS. This is a very clear case: if the deed was recorded, it
has one effect but if you do not record the deed you have another effect. What should the
lawyer do? Mr. Berry did not answer the fact pattern but noted that the attorney needs to
get some advice.

XIX. CHARITABLE MATERIALS

Mr. Berry highlighted materials discussing charitable gift agreements.

XX. CRYPTOCURRENCY

Mr. Berry highlighted the materials and presentation of Benetta Jenson and Austin
Bramwell. The key insight he got out of it was that bitcoin should be thought of as gold
sitting in a box; you will never get to what is in the box without the key.

XXI. TECHNOLOGY

Keep your bar association from overreacting. Mr. Berry indicated that we need to resist
that if we can. There are provisions that should be put into your engagement letters
regarding what your firm is doing with respect to technology.

XXII. FAMILY OFFICES

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
206
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

All of us are very interested in family offices. The program at Heckerling was so large
that the venue had to bring in more chairs.

XXIII. RETIREMENT PLANS

Mr. Redd wondered whether trusts are really necessary for qualified plans and IRA
beneficiaries. He indicated that Natalie Choate had a lot of examples in her presentations
involving messed up roll over IRAs. What if you roll over the wrong asset? What if you
change the character of the asset?

XXIV. FUNDAMENTALS PROGRAMS

Louis Harrison is the “King of Billing”. . . according to Mr. Berry. Louis is also the
“King of Getting Rid of Problem Clients”. . . according to Mr. Berry. He joked about
Louis’ 90/10 rule that 10% of our clients are problem clients and drive us crazy. Mr.
Berry briefly discussed the problem with ascertainable standards and creditor protection.
He thought that a great deal of thought should be given to using powers of appointment to
increase basis.

XXV. STATE CASES

Read the Post and Wellington cases, according to Dana Fitzsimons. Mr. Berry and Mr.
Redd agree that the Horgan and Schyer cases dealing with the ability or lack thereof to
amend trusts are interesting. Mr. Redd joked that maybe the word “irrevocable” still
means something.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
If you missed a report, please check the above website or the ABA-PTL archives at the
link below.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
207
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
208
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Heckerling 2019 – Report #14 - Vendors

As we have done in January for the last twenty-two years, and again with the permission
of the University of Miami School of Law, we will be posting daily Reports to this list
containing highlights of the proceedings of the 53rd Annual Philip E. Heckerling Institute
on Estate Planning that is being held on January 14-18, 2019 at the Orlando World Center
Marriott Resort and Convention Center in Florida. A complete listing of the proceedings
and the Institute's 2019 brochure are available at www.law.miami.edu/heckerling and the
list of speakers and the Advisory Committee were included in Introduction Part I.

This Report # 14 includes our vendor coverage. Reports 1 through 13 included our
coverage of the general, special, and fundamentals sessions.
This is the final 2019 Heckerling Report.

THE AMERICAN HEART ASSOCIATION

www.heart.org/HEARTORG/
The American Heart Association Charitable Estate Planning Team offers complimentary
services and resources for professional advisors as they help their clients become a
relentless force for a world of longer, healthier lives. A charitable provision made during
estate planning can be a tax friendly way to benefit clients and their loved ones, while
helping save lives. The American Heart Association is the nation’s oldest and largest
voluntary organization dedicated to fighting heart disease and stroke. With the help of
over 40 million volunteers and supporters, the AHA advocates for stronger health polices,
focuses on improving public health education, and has funded more than $4.1 billion in
research since 1949.

ASHAR GROUP, LLC

www.ashargroup.com
Ashar Group is a nationally licensed life settlement broker and policy valuation expert.
The Ashar Secondary Market Valuation (SMV) is an independent appraisal of life
insurance fair market value (FMV) based on the IRS definition of "willing buyer –
willing seller." Estate and tax attorneys choose the SMV whenever an alternative
appraisal of FMV could benefit their clients. Ashar has witnessed a 25% increase in their
life settlement business in 2018 due to introductions from planners and fiduciaries. There
has also been a recent uptick in SMV request as a result of the increased estate tax
exemption. For additional information, refer to an article by Jason T. Mendelsohn,
President of Ashar Group, in the February 2018 issue of T&E Magazine titled "Willing
Buyers Change the Face of Life Insurance Valuation.”

BRENTMARK, INC.
www.brentmark.com
Brentmark was recently purchased by longtime employee Nicole Maholtz who is
expanding the consulting side of the business. Brentmark continues the principles of its
founders that good financial and estate planning decisions must be supported by facts and
thorough analysis in order to mitigate risks involved. Their goal is to help you improve
the quality of the financial, tax, as well as estate planning products and services you

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
209
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

provide to your clients; improve your proficiency in the area of tax, financial and estate
planning as they relate to IRA’s and other retirement plans; and ultimately increase your
competitive edge in the financial marketplace. They continue to provide tools for
retirement products and services in addition to training and support for financial, tax and
legal professionals who provide such services to their clients. They have also recently
added Ed Slott a nationally recognized IRA and small Business Planning expert to help
provide technical expertise and training. For more information visit their website or
contact Nicole Maholtz, using Nicole@brentmark.com.

BRIDGEFORD TRUST
http://bridgefordtrust.com/
Bridgeford Trust is a South Dakota Trust Company that was chartered in 2012 and has
over $3 billion in assets. They serve both domestic and foreign families and recently
launched their coming to America Initiative to attract large international families seeking
U.S. trust solutions. They have built an internal infrastructure to serve international
families that includes: (i) in depth consultation with international legal and tax experts
around issues specific to international families seeking U.S. trust solutions, (ii) extensive
education of staff around planning and administrative nuances of the international
community, (iii) retention of an international trust/tax/legal expert, and (iv) development
of strong internal compliance and Know Your Customer (KYC) procedures in
conjunction with the South Dakota Division of Banking. The initiative was planned and
implemented to provide sophisticated trust solutions around privacy, asset protection,
control, flexibility, and tax planning. Bridgeford Trust simultaneously launched an
aggressive, multi-faceted educational campaign that included: whitepapers, blogs, videos,
webinars, and social media. For more information, please visit their website or contact
David Warren, dwarren@bridgefordtrust.com or (717) 381-5293.

CAF AMERICA: GLOBAL DONOR ADVISED FUNDS

www.cafamerica.org
A global donor advised fund with more than 27 years of experience, CAF America makes
giving abroad and domestically easy, efficient, and tax-effective. By engaging with CAF
America's expert staff, advisors can break down the barriers to giving for their clients and
expand their own practice with a back-office solution for international giving. CAF
America takes on all administrative burdens, guarantees regulatory compliance, mitigates
risks, and protects donors' reputations. With tailored giving and investment solutions, the
ability to transfer complex assets, and unparalleled client dedication, CAF America is the
solution for world-class giving.

COLLECTOR SYSTEMS
www.collectorsystems.com
Since 2003, Collector Systems has provided cloud-based software for managing
collections of fine art, jewelry, and other valuables. Their intuitive program provides
critical tools for streamlining collections management, along with a flexibility to the
needs of the individual client, that has made us an indispensable asset for family offices,
private collectors, trusts, estates, foundations, corporations, insurance companies,
appraisers and advisors. With the privacy and security of their clients' data as the

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
210
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

cornerstone of our company philosophy, Collector Systems continues to grow at a rapid

rate, with an expanding network of HNW and UHNW clients currently managing over
$22 billion in assets across 28 countries on their platform. For more information you can
go to the website or contact their president Eric Kahan at ekahan@collectorsystems.com
or call 212-431-0897 x1.

CORPORATE VALUATION SERVICES, INC.

http://www.corporatevaluationservices.com
Corporate Valuation Services, Inc. (“CVS”) provides valuation and forensic services for
the following: Tax, Estate, and Gift Planning; Marriage Dissolutions; Corporate
Litigation; Shareholder Buyout; Fairness Opinions and Solvency Opinions; Matters
before the SEC and IRS; and any other issues requiring financial analysis. Their
professionals, including Tony Garvy, ASA, CPA/ABV/CFF, CVA, FCPA, CDFA, and
James S. Arogeti, CFA, CVA, hold accreditations by the American Society of
Appraisers, American Institute of Certified Public Accountants, and the National
Association of Certified Public Valuation Analysts. CVS is committed to Chicago and
Naples’ business community with its participation in the Illinois CPA Society,
Association for Corporate Growth (ACG), Chicago Estate Planning Council, DuPage
County Estate Planning Council, Northwest Suburban Estate Planning Council, Greater
North Shore Estate Planning Council, Divorce Illinois, Naples Estate Planning Council
and other professional organizations. Contact Cynthia McNally, Director of Client
Relations, for more information please contact Cynthia at
cmcnally@corporatevaluationservices.com or (312) 324-0376.

CHRISTIANA TRUST │ WSFS WEALTH

https://www.wsfsbank.com/Wealth/Trust-Services
Christiana Trust is staffed by experienced, knowledgeable and caring professionals
committed to personal service. It offers traditional, directed and administrative trustee
services. Christiana has extensive custodial services including the ability to execute and
process all buy and sell orders in accordance with client’s instructions. In addition to
online access, Christiana provides timely and accurate statements that detail all income
and principal transactions and list assets held, their tax basis, current market value and
estimated income. Christiana handles securities and performs all the administrative tasks
with a penchant for detail and a level of individualized service that is unsurpassed.
Attorneys can use Christiana for its services in both Delaware and Nevada.

ERNST & YOUNG LLLP

www.ey.com
Ernst & Young (EY) provides a multitude of specialized services. Its Fiduciary/Trust &
Estate Accounting Services group offers comprehensive trust and estate accounting
services, helping trustees, executors, banks, law firms, and family offices manage risk.
Contact Francine Lee (francine.lee@ey.com or 212-773-7933) for information. The
Family Office Advisory Services group has a proprietary approach to risk review in the
family office space. They look at risk across the entire organization, focusing on seven
functional areas to determine whether risk is being mitigated, insured, or monitored as
appropriate. Contact Robert A. Stover, Jr. (bobby.stover@ey.com or 214-969-8321) for

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
211
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

more information. EY also has specialized departments addressing Family Enterprise

Business Services (contact James C. Bly, Jr. at james.bly@ey.com or 724-933-6600), and
Cross-border Tax Advisory Services (contact Justin Ransome at Justin.ransome@ey.com
or 202-327-7043).

ESTATE VALUATIONS & PRICING SYSTEMS, INC. (EVP)

www.evpsys.com
Estate Valuations & Pricing Systems, Inc. (EVP) offers a suite of products in their EVP
Office software suite, including the popular EstateVal software program for use with the
Form 706, and GiftVal, providing gift valuations for use with the Form 709. The latest
release (8.3) includes valuation information for the most popular cryptocurrencies, with
data covering the past several years. EVP has also implemented EVP Everywhere, a web
interface allowing other software to work with EVP without having installed EVP
programs. This interface is in place with TEdec, in working demo form with
EstateWorks, and in development with GEMS. You can even program EVP Everywhere
to work with Alexa, letting you ask her, for example, last week’s valuation of your
favorite stock. As always, the EstateVal and GiftVal programs are free (download at
their website), and fees incurred by use, with discounts based upon monthly volume.
Additional information is available on their website or call Christina Ramirez at 1-818-
313-6300.

ESTATEWORKS SYSTEMS
www.estateworks.com
EstateWorks provides a platform for workflow management, communication, and
collaboration focused on estate planning and administration. Attorneys often depend on
EstateWorks to improve the efficiency, transparency and overall productivity of their
trust and estates operations. In addition to functionality that streamlines the day-to-day
work of individual team members while incorporating specific institutional requirements,
EstateWorks provides customizable analyses and reports that enhance the active
management of the overall business. Probate forms for select states are available.
Different pricing structures are available, with billing by the case available for those who
want to charge the cost through to the client. For further information contact
sales@estateworks.com or visit their website.

FAIRSPLIT.COM
www.fairsplit.com
FairSplit.com offers a web-based program to facilitate the transparent and fair division of
assets of an estate, trust, or even a downsizing family. After uploading photographs of
the assets room by room and assigning values, interested parties can be invited to review
and express interest in items. New this year, you can click on a photograph and add asset
descriptions directly to the photo. This is a wonderful solution for geographically diverse
families, or situations where it’s best to keep family members apart while allowing full
participation in the division of assets. FairSplit.com’s services are tiered. The first tier –
including uploading photographs and listing of assets for use in family division processes
and conference calls – is free. Other tiers offer additional options such as a yes/no round
to determine which assets have interest versus assets that the administrator can begin to

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
212
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

sell or donate, emotional value rounds where points are assigned and then used to bid on
assets based on individuals’ interest, and an automated selection round using the order of
preference assigned by individuals. FairSplit can also help you work with local service
providers for photography, listing and valuation. Co-branding is available for use with
your clients. Visit their website to register for the free first tier, pick a room in your
home or office and try it out to see how easy it is to use.

FILECENTER
www.lucion.com
FileCenter offers a cost-effective and easy-to-use document management system.
Predefined document types and folders ensure consistent methods and organization
across your firm or company, regardless of how many people are creating and storing
documents. Scanning documents to electronic files is quick and easy, with different
options depending on your needs. The preview function allows you to preview an
electronic file without opening it, making your electronic files as accessible as flipping
through a physical file. FileCenter has its own pdf editor built in, allowing you to redact,
watermark and Bates number your documents seamlessly. Different access settings can
be applied to different users or groups of users, allowing control over who can change or
delete files, for example. FileCenter can also make your existing electronic files fully
text searchable, allowing you to locate those mislabeled or misfiled documents. Their
highest-level license costs $249.95, but FileCenter is offering a $60 discount through
January 31, 2019 if you mention Heckerling. Visit their website at
www.lucion.com/filecenter-overview.html to learn more, and schedule a demo to see
how FileCenter can help your office become more organized and efficient. FileCenter is
fast and easy to implement and use, but services are also available to get your office up
and running for those who would like assistance.

GILLETT PUBLISHING LLC GEMS – GILLETT ESTATE MANAGEMENT SUITE

www.gillettpublishing.com
Gillett Estate Management Suite (GEMS) provides popular tax return preparation
software for Forms 706 and 709 as well as trust accounting software. GEMS has
integrated the ability to interface with multiple brokers and has made major
enhancements to the Quicken interface, making it easy to download assets and
transactions directly into your trust and estate accountings. GEMS stays up to date,
making critical, time-sensitive updates quickly when new IRS forms are released. Gillett
Publishing is offering a 40% discount on new licenses through the end of Heckerling this
year, and a 25% discount on new licenses through the end of January 2019. Contact them
at sales@gillettpublishing.com and mention Heckerling to take advantage of this great
offer. Visit their website to download a free demo.

HEIRSEARCH
www.heirsearch.com
Look for heirs a better way. HeirSearch.com, a division of International Genealogical
Search Inc. (IGS), provides international beneficiary and heir location services. Unlike
other search firms, HeirSearch does not charge a percentage of the estate, keeping them
above recent litigation around other firms’ billing practices. HeirSearch also offers DNA

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
213
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Services, with the right staffing, processes, and relationships with accredited labs to
survive evidentiary challenges in the courtroom, unlike the mass-marketed DNA-based
genealogy services offered today. HeirSearch’s forensic genealogy services can establish
the relationship between two specific people and, if confidentiality is of concern, the
client has the option to receive results DNA directly, rather than through HeirSearch. For
more information on the services or educational opportunities offered by HeirSearch or to
request a no-obligation quote, visit their website or contact Kathy McCourt, 1-800-663-
2255, ext. 6748.

HENLEY & PARTNERS

www.henleyglobal.com
Henley & Partners provides citizenship and residency planning services to high net worth
and ultra-high net worth clients seeking the security and expanded options available to
those with greater international mobility. This is becoming increasingly important as our
global climate sees increasing political and economic instability. With offices in over 30
countries, Henley & Partners are experts in residence- and citizenship-by investment, one
of the more direct methods for clients to avail themselves of international asset
diversification and increased mobility. Visit their website to learn more about how
Henley & Partners can assist your clients, and to access a whitepaper on the advantages
of obtaining alternative citizenship.

THE NATIONAL UNDERWRITER COMPANY

www.nationalunderwriter.com
The National Underwriter Company provides tax, insurance, and financial planning
research resources for professionals, including the popular Tax Facts, written in easy-to-
digest Q&A format. Tax Facts is accessible on all types of devices, including mobile
devices via the Tax Facts app, which allows the user to opt in to push alerts when
important tax changes occur. A tested, trusted tax authority for estate planners, The
National Underwriter Company’s resources can keep you updated on ever-changing tax
regulations. All resources have been fully revised to include information and analyses on
the recent tax reforms. In February, The National Underwriting Company will launch a
turnkey class to assist in passing the new Securities Industry Essentials (SIE) exam. The
class includes all topics, and provides research, a sample test, and flash cards. For more
information, visit their website or call (800) 543-0874.

LEIMBERG, LECLAIR & LACKNER, INC. | NUMBERCRUNCHER, 199A

MODULES
Vince Lackner, Technical Consultant and Shareholder
Leimberg’s familiar NumberCruncher is expanding with seven new modules dealing with
different aspects of the deduction offered by Code Section 199A. Vince Lackner, a
technical consultant for NumberCruncher and Leimberg shareholder, explained that the
modules will offer a “first-of-its-kind” visual and interactive display of the various
aspects of Section 199A, including visualization of the calculations and client-ready
reports.
Enacted as part of the 2017 Tax Act, Section 199A provides a deduction for certain types
of pass-through entities with a number of limitations and caps, which are phased out

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
214
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

across multiple income brackets. Like the rest of NumberCruncher, the 199A modules
require a professional to operate, but they provide a robust platform for calculating the
impact of Section 199A for clients and producing client-facing reports that can help
explain the byzantine rules.
In fact, the IRS estimates that Section 199A will impact 10 million taxpayers who will,
collectively (along with their advisors), spend 25 million hours each year on reporting
and compliance associated with the rules. Having worked through Section 199A himself
in depth, Lackner noted that the IRS estimate was probably on the low side. The firm
estimates that the new NumberCruncher modules will “reduce the learning curve for
Section 199A from 30-40 hours to two hours for each tax return preparer.”
While still in late-stage Beta, Lackner says that he expects the 199A Modules to be
released for NumberCruncher within the next few months. For more information, visit
http://www.leimberg.com/products/software/numbercruncher.html.

NEXT GENERATION TRUST COMPANY

www.nextgenerationtrust.com
Founded on the philosophy that every person should have control over their own
retirement plans, Next Generation Trust Company educates consumers and professionals
about self-directed retirement plans and nontraditional investments, a strategy at one time
reserved only for the very wealthy. Next Generation Trust Company, a custodian of self-
directed retirement plans, is a trust company chartered in South Dakota. Its sister firm,
Next Generation Services provides comprehensive account administration and transaction
support with Next Generation Trust Company acting as custodian for all accounts. The
neutral third-party professionals at Next Generation Trust Company expertly guide
clients and their trusted advisors as part of their white glove, personalized service for a
seamless transaction experience from start to finish.

PEAK TRUST COMPANY

www.peaktrust.com
Peak Trust Company serves individuals, families, and advises by offering tax favored
trust situs in Nevada and Alaska. They have billions under management and administer
various forms of trusts including irrevocable life insurance trusts, asset protection trusts,
self-settled spendthrift trusts, special needs trusts, charitable remainder trusts, dynasty
trusts, and self-directed IRA’s. New for this year they have released their family legacy
planning program which creates a vision for family goals with wealth and hot to
implement those ideas. Their director of estate planning, Jonathan Blattmachr, also
assists counselors in setting up estate plans for high net worth clients. Peak was formerly
known as Alaska Trust Company. For more information visit their website or call (907)
278-6775.

SOTHEBY’S
www.sothebys.com
Sotheby’s has gone high tech! In addition to their traditional auction and sales services,
Sotheby’s has integrated cutting edge technology into the art world. Thread Genius uses
taste-based artificial intelligence to suggest art and auction items based on other items the
client indicated they like. Wondering how art investment compares to traditional

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
215
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

investments? Mei Moses compiles historic data regarding repeat public auction sales to
track the performance of art as an asset class. Compare the performance of art against
another index or commodity such as gold to help clients understand art as an investment.
Reports include geopolitical, social and other risk factors, and use charts comparable to
those found in traditional investment reviews. Some types of art have reports at the
ready, other reports can be customized for clients. Finally, Sotheby’s Scientific Research
Department is the only auction house with an in-house scientific research department
with state-of-the-art technology to scan art, determine its chemical compositions, and
determine whether any anomalies exist that would indicate a forgery, such as chemicals
or brush fibers in paintings that did not exist or would not have been used during that era.
These expert services can provide buyers with confidence in the authenticity of their
assets and purchases. Visit their website for more information.

TAXBIRD
www.taxbird.com
Stop manually tracking and counting your days in various states for income tax purposes!
For an annual fee of $19.99, TaxBird tracks your days in different states using the
existing location services on your smart phone. The data can be accessed to produce a
detailed year-end report that you can provide directly to your tax advisor and, if needed,
taxing authorities. New since last year, you can now upload your planned trips into the
app to project how your plans may impact your tax residency. The app also includes
reminders as you approach set state residency thresholds such as 90, 30, and 10 or less
days remaining in a state, or alert you of missing data in the event your location services
or phone were turned off. Spouses can take advantage of family sharing, and both use the
app for the price of one subscription. Currently available for IOS, TaxBird expects the
Android version to be available by the end of Q1 2019. Sign up on their website to be
alerted when this is launched. Professionals at Heckerling looking to become familiar
with the app before recommending their clients can contact support@taxbird.com for a
free trial subscription. Visit their website for an overview demo and to sign up for their
mailing list.

TEAM RISK MANAGEMENT STRATEGIES

Rachel Green, Chief Executive Officer
“TEAM,” it turns out, is an acronym that actually means something, explains Rachel
Green, Chief Executive Officer of TEAM Risk Management Strategies. It stands for
Trusted Employee Administration Management Risk Management Strategies and the
company operates as something of an out-of-house human resources department for
fiduciaries looking to outsource administration of household employees. In performing
that function, Rachel says, the company also does something that those fiduciaries might
find even more valuable: it acts as a liability shield to the trust and the institutional
fiduciary by serving as the employer of record for what would otherwise be trust
employees. That service has proved to be valuable TEAM’s cadre of blue chip clients,
which include Wells Fargo, Northern Trust, SunTrust, and BNY Mellon. Those clients
are loyal and grateful—Rachel reports that well over ninety percent grade TEAM Risk as
a 9 or 10 in its annual client satisfaction survey. TEAM has experienced significant
growth over the past several years, especially with family offices.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
216
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

So what, I asked Rachel, does TEAM do, exactly? That depends. For a trust with an
elderly beneficiary, it might coordinate the employment of in-home caregivers, handling
everything from the on-boarding process to termination (they have a dedicated HR
specialist for that—I asked). For a trust holding a sprawling Great-Gatsby-esque estate, it
might bring the gardeners, house cleaner, and stable hand into a direct-deposit payment
system. For a trust that maintains a rambling Montana cattle ranch, it could streamline
the semi-annual chaos of hiring seasonal ranch hands. What it doesn’t do is actually
source the employees; that is still up to the fiduciary or, in some cases, the family.
In one success story that Rachel shared, a family discovered that a long-term household
employee had misused a credit card entrusted to them for care-related expenses.
Avoiding a potentially messy situation, TEAM stepped in, coordinated with the police,
handled the termination of the employee, and reimbursed the family for the stolen
property using TEAM’s theft insurance policy. This sort of white glove service, Rachel
explained, is what allows TEAM to operate so well in the often intimate environment of
household employees.
Recently, TEAM has embarked on system-wide upgrades to their operating system and
now offer an employee web portal and can perform the entire onboarding process online
(of course, for those employees who prefer paper, TEAM can do that too). Next up are
smart phone applications for clocking in and out. While these are not exactly client-
facing upgrades, Rachel explained that by reducing friction for employees it makes the
end-client’s lives easier.
TEAM is based in San Diego, California, but operates in all fifty states and Puerto Rico.
It provides its services for a flat monthly administrative fee (charged per employee), with
the trusts covering salary and all other costs of employment. For more information, visit
http://team-risk.com/

THE FREEDOM PRACTICE

4freedompractice.com
The Freedom Practice provides systems, processes and coaching designed exclusively for
estate planners to help you differentiate your firm by providing an experience that clients
will value, even in this age of commoditization of services. They limit their members
geographically, to ensure that your practice stands out among others in your area. The
Freedom Practice also offers back office support options for those practitioners who are
not able to expand their staff. Take the quiz on their website to see if The Freedom
Practice might be right for you. Then sign up for their next Test Drive Event, a two-day
workshop analyzing your practice and providing an in-depth look into how The Freedom
Practice could advance your firm.

THE REAL REAL

Karin Dillie, Director of Trusts & Estates Team
The Real Real is an online luxury consignment retailer that can best be described as a
combination of your local consignment boutique and Amazon.com. The sprawling
online store, founded in 2011 by veteran e-commerce executive Julie L. Wainwright,
began by serving as a trusted online platform to buy and sell gently used high-end
women’s shoes and handbags. Since then, the store has expanded significant and now
sells more than 400 top brands in products from clothing and home goods to fine jewelry

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
217
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

and watches. The Real Real has also entered the Trusts and Estates space, offering an
alternative to bulk estate-buyers for high-end items owned by decedents. Karin Dillie,
whose experience ranges from elite auction houses to Silicon Valley startups, runs that
team.
Karin explained the Real Real’s process in just a few steps, which begins with an on-site
visit by a member of the Trusts & Estates Team. During that visit, the team will take a
look at the items identified by the fiduciary or the family, take pictures, and give price
estimates. Karin explained that often the team will identify additional items that can be
sold through The Real Real, which always comes as a pleasant surprise. The fiduciary
gets an electronic catalogue that can be circulated among beneficiaries who can, if
appropriate, pick any items they wish to keep. If the decision is made to sell items
through The Real Real, items are picked up, packaged, and shipped to the company’s
New Jersey warehouse where a team of experts authenticates, photographs, and stores the
items. The items are then listed for sale and the fiduciary has access to an online account
to track sales and, if needed, print reports.
As professionals in this space know, it comes down to results. And that, Karin says, is
where the Real Real delivers. Three quarters of listed items sell within 30 days, which
lets clients quickly convert tangible personal property into cash. According to the Real
Real’s internal data, clients net up to three hundred percent more than they would selling
with traditional resellers. And the inventory process is included with the Real Real’s
sales fees, which vary depending upon the number and value of items sold.
The Real Real is based out of San Francisco, California, but has team members
nationwide. For more information, visit www.therealreal.com

TIEDEMANN WEALTH MANAGEMENT

Steve Aucamp, Managing Director
Tiedemann Wealth Management (“Tiedemann”) is an independent investment and wealth
advisor serving individuals, families, trusts, endowments, and foundations across the
country. Founded in 1999 and celebrating its 20th anniversary in September, Tiedemann
now serves more than 400 families with $20 billion in assets under management. With
nine offices—New York, San Francisco, Seattle, Dallas, Palm Beach, Seattle,
Washington D.C., Aspen, and Delaware—the firm has nationwide reach.
Steve Aucamp is a managing director of Tiedemann, with responsibility for managing
client relationships. With an open architecture, Steve explained, Tiedemann is able to
serve the needs of sophisticated high-net-worth clients who may use multiple
independent investment advisors across the world. Tiedemann prides itself on low
turnover—both of staff and clients. In fact, Steve shared that the firm’s very first client
is still with Tiedemann.
In some ways, Tiedemann is almost a multi-family office. The firm is able to provide
investment advice, act as a fiduciary (through the affiliated Delaware Trust Company),
and provide wealth and family planning. Tiedemann takes a balance sheet approach and
coordinates with clients’ existing advisors, often diagramming existing estate plans in a
way that clients find intuitively understandable.
Often, though, its Tiedemann’s flexibility that sets it apart—each client receives a
bespoke set of services depending upon their individual needs. In one instance, Steve
shared, a family now in its third generation worked with Tiedemann to create a unified

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
218
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

investment strategy. Working with the family’s other advisors, including attorneys and
CPAs, Tiedemann helped the family create a structure with limited liability companies
offering joint investment and asset management to preserve family unity and allow
family members—whose wealth was now spread out—to continue to take advantage of
lucrative alternative investments including hedge funds, private equity, and venture
capital.
One unique offering that Tiedemann brings to the table is a robust system for impact
investing. More than a buzzword, Tiedemann’s clients take impact investing very serious
and today more than $2 billion of Tiedemann’s $20 billion in assets under management
are impact invested. The firm uses a propriety online diagnostic tool to produce client
recommendations and engaging diagrams that help clients visualize the process.
For more information, visit https://www.tiedemannwealth.com/.

VCORP SERVICES
Sarah Rayburn, Head of Business Development
VCorp Services is a corporate concierge for nationwide entity filings that was recently
acquired by multinational Wolters Kluwer. The firm’s clients range from attorneys, to
accountants, to financial advisors, to start-up founders. Anyone, explained Sarah
Rayburn, head of VCorp’s business development team, who needs to register entities and
keep track of state filings can benefit from VCorp’s platform.
The proprietary online portal developed by VCorp is what truly sets it apart from the
competition, says Sarah. That portal offers an array of information for advisors and end
clients (both of whom can be given access): from calendars and reminders, to to-do lists,
to records of filed documents, to on-demand reports, everything is accessible online
twenty-four hours a day, seven days a week.
In addition to entity filings, VCorp will also serve as a resident agent and provides
extensive non-profit serves, including preparation of the application for recognition of
exemption (IRS Form 1023), annual non-profit returns (IRS Form PF 990s), to state sales
tax exemptions.
For more information, visit https://www.vcorpservices.com.

VERALYTIC
Barry Flagg, Inventor and President
Veralytic provides consumers and their advisors with a patented five star independent
rating system for individual insurance products. The system is unique in that, unlike
traditional ratings systems that focus solely on the insurer, it measures the objective
quality of a given insurance product against the universe of peer group products in
relation to the client’s goals and objectives. While irrevocable life insurance trust
trustees often use the service to document their investment decisions, Veralytic is a
valuable tool for anyone purchasing life insurance and anyone giving advice about
buying a policy.
The industry’s practice of using internal projections, says inventor and President Barry
Flagg, has been criticized by leading actuarial authorities as “fundamentally
inappropriate.” Veralytic departs from industry practices by rating across five separate
measurements covering the claims paying ability of the carrier, the cost of the policy, the
stability of pricing representations, the insured’s access to cash value, and the carrier’s

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
219
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

actual historic investment performance. With rising litigation over life insurance, Barry
cautions that fiduciaries and advisors should be careful to rely on insurance industry
practices that have been criticized by regulators.
Veralytic has begun to roll out a new service for its fiduciary clients, providing (through
Veralytic subscribers) an independent insurance advisor for trusts holding life insurance.
Much like an investment advisor, these insurance advisors work with fiduciaries to
identify proper trust investments—in this case, insurance policies that are highly rated by
Veralytic’s proprietary rating system. This, explains Barry, provides a risk-management
solution for fiduciaries of trusts that own low rated policies. Sometimes fiduciaries are
faced with a grantor who is simply uninterested in obtaining a different policy, often for
personal reasons. In those cases, fiduciaries can protect themselves from frustrated
beneficiaries with grantor election forms that document the grantor’s (who is also the
insured) refusal to submit to a physical to purchase a new, more highly rated policy.
While still new, this service has been an instant success, says Barry.
A recent development affecting advisors who work in the insurance field, explained
Barry, was the New York Department of Financial Service’s issuance of what is known
as the best interest rule for life insurance in August 2018 (effective in February 2020).
The California Department of Financial Services has publicly supported the rule and
urged the National Association of Insurance Commissioners to adopt New York’s rule
nationally. According to Barry, the rule requires that “producers” (essentially, insurance
agents and brokers), act in the client’s best interests and must consider all available
products. Insurance carriers, says Barry, are required to disclose fees and costs of their
products. According to Barry, those professionals to help comply with the best interest
rule in New York and elsewhere can use Veralytic.
For more information, visit http://www.veralytic.com/

WELCOME FUNDS
Adam Sosnick, Senior Vice President, Sales and Marketing
Every planner has seen it at least once. Client purchased a significant term life insurance
policy as a gap filler years ago and is asking for advice because the policy is ready to
mature and will either (a) lapse or (b) convert into a universal or whole life policy.
Unfortunately, the client does not like either option. Enter Welcome Funds of Boca
Raton, Florida. Welcome Funds helps individuals sell unwanted, unneeded, and/or
unaffordable life insurance policies as a broker in the life settlement market.
Selling a life insurance policy, which takes about three months on average, may appear a
bit unusual to the uninitiated. Initially, though, the process strongly resembles that of
purchasing a life insurance policy. After a policy-owner approaches Welcome Funds, its
advisors pre-screen the applicant based on financial and health data to determine whether
selling the policy is a viable option—an aspect of the process, explains Adam Sosnick,
Senior Vice President of Sales and Marketing, that is unique to Welcome Funds. Once
the owner is briefed and ready to move ahead with the sale, the insured’s health records
are gathered and passed on to a third-party company that produces an independent life
expectancy report. That report, says Adam, is what buyers rely on to determine what
they will pay for a policy. Armed with the life expectancy report, Welcome Funds
associates use its unique auction-style platform to actively market the policy to all
potential buyers. In all, the process typically takes between four and six weeks.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
220
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Adam shared one recent instance where owners of a $9 million joint life insurance policy
approached Welcome Funds about a sale because the funds were no longer needed to pay
estate taxes. The policy had a low surrender value that would have been eaten up by
annual premiums in less than a year, but both owners were in their eighties. Welcome
Funds estimated that the policy would garner between $1.4 and $1.7 million and, on that
basis, the owners approved a sale. Within a few weeks, a buyer offered $1.6 million and
the owners happily sold.
For clients looking to unlock value stored in their life insurance policies, life settlement
could be a tempting option—especially, notes Sosnick, with the changes to the Tax Code
effected by the 2017 Tax Act. For more information, visit
https://www.welcomefunds.com/

WILMINGTON TRUST
Alvina Lo, Chief Wealth Strategist
Based in Wilmington, Delaware, Wilmington Trust is the private wealth arm of M&T
Bank, the fifteenth largest bank in the country. Wilmington Trust, explains Alvina Lo,
the firm’s Chief Wealth Strategist, takes a holistic approach with its clients, but leads
with planning. That approach, says Alvina, is unique in the industry and helps
Wilmington Trust stand out with advisors and with clients.
Wilmington Trust focuses on its relationships with client advisors, whether they are
attorneys, accountants, or financial advisors. In one recent instance of that collaborative
effort, Alvina shared the story of a self-made millionaire owner of a “brick and mortar”
business who had banked with M&T Bank for years. Working with the client’s other
advisors, Wilmington Trust helped to quarterback a plan in which the client placed some
ownership of the business in a Delaware Trust. When private equity investors purchased
a significant interest in the business, some of the trust’s investment turned liquid and the
value grew significantly. Wilmington Trust has grown the relationship by working with
the client’s children as co-trustees, both as a directed trustee (as to the business assets)
and a traditional fiduciary (as to the liquid assets). While the client relationship started
small, the client was never treated that way and that, says Alvina, encapsulated
Wilmington Trust’s approach to client services.
For more information, visit https://www.wilmingtontrust.com/wtcom/.

====================================================
We also will be posting the full text of each of these Reports on the ABA RPTE Section's
Heckerling Reports Website
at https://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/
heckerling-2019/as we have since the 2000 Institute. The Reports from 2000 to 2018 can
now be found
athttps://www.americanbar.org/groups/real_property_trust_estate/events_cle/heckerling/.
If you missed a report, please check the above website or the ABA-PTL archives at the
link below.
In addition, each Report from 2006 to date can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive that now only goes as far back as
January of 2006 and is located athttp://mail.americanbar.org/archives/aba-ptl.html.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
221
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Heckerling 2019

Our on-site local Reporters who are present in Orlando in 2019 are JOANNE HINDEL,
Esq., a Vice President with Fifth Third Bank in Cleveland, Ohio; CRAIG DREYER,
Esq., an attorney with the Dreyer Law Firm in Stuart, Florida; KRISTIN DITTUS, Esq., a
solo attorney with offices in the Denver, Colorado area; MICHAEL SNEERINGER,
Esq., an attorney with Porter, Wright, Morris and Arthur, LLP in Naples,
Florida; MICHELLE R. MIERAS, Esq., Chief Fiduciary Officer, SVP, with ANB Bank
in Denver, Colorado; BETH ANDERSON, Esq., an attorney with Wyatt, Tarrant &
Combs, LLP in Louisville, Kentucky; PATRICK J, DUFFEY, Esq., an attorney with
Holland & Knight in Tampa, Florida; SCOTT M. HANCOCK, Esq., an attorney with
Winstead PC; EDWIN P. MORROW III, Esq., . Eastern U.S. Wealth Strategist for U.S.
Bank Private Wealth Management in Cincinnati, Ohio; and DAVID J. SLENN, Esq., an
attorney with Shumaker, Loop & Kendrick, LLP, in Tampa, Florida.

The Report Editors in 2019 will be BRUCE A. TANNAHILL, Esq., a Director of Estate
and Business Planning in the Mass Mutual Financial Group in Phoenix, Arizona, He will
be ably assisted in those duties this year by Reporter MICHELLE R. MIERAS, Esq.

Published by the American Bar Association Section of Real Property, Trust and Estate Law ©2019. Reproduced with
permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any
222
means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.