The Estate Planner

September 2011 The Estate Planner Archive IN THIS ISSUE: Cowles Resources News, Articles, and Updates for the Estate Planner Order Cowles and Supplies Cowles Members Only See updates and article references involving charitable Westlaw trusts and donations; elder law; estate and gift taxes; estate and trust administration--probate; estate planning; Contact Us generation-skipping transfer tax; health care; interest; E-Mail the Editor small and mid-size law firm practice; special needs trusts; guardianships; trusts; and wills Other Resources Other Reference Material Other Newsletters

Cowles Tech Tip

Version 2011-2 of Trust Plus redesigned the Client area, adding new features and capturing additional client information. Screens are bigger, and the list of clients is sortable by the client's first or last name, the spouse's name, the file number, or the date created. This Tech Tip discusses the new tab for children, allowing you to record information for the client's children.

NEWS, ARTICLES, AND UPDATES For The Estate Planner

Charitable Trusts and Donations

ARTICLES The Life Span of a Private Foundation: Perpetual or Limited? Richard L. Fox and Dorian Bon. (Estate Planning, September, 2011). Westlaw: 38 ESTPLN 19.

OTHER U.S. District Court. Federal Court Dismisses Breach of Charitable Trust Claim. On September 8, the U.S. District Court for the Northern District of Ohio granted the Cleveland Clinic Foundation’s motion to dismiss the City of Cleveland and Mayor Frank G. Jackson’s action against the foundation for breach of contract and breach of charitable trust claims. The city sought to compel the foundation to continue operating one of its regional hospitals, alleging they violated Title VI, 42 U.S.C. § 2000d, breached charitable trust obligations, and breached tax-exempt bond contracts through its decision to close Huron Hospital. The court found that the city failed to support its claim that a charitable trust exists requiring the foundation to keep the hospital open, and “would in any event lack standing to enforce such a charitable trust.” Westlaw: Jackson v. Cleveland Clinic Foundation, N.D. Ohio, No. 1:11-cv-01334-SO, 2011 WL 4007732 (September 8, 2011); Web: Information about this case is available on the U.S. Court's PACER system. A subscription to PACER is required. U.S. Tax Court. Court Rules on Charitable Contribution and Business Deductions. On September 1, the U.S. Tax Court determined that Albert Fernandez, a self-employed, licensed clinical social worker and psychotherapist, was not entitled to a charitable contribution deduction in excess of the amount allowed by the Internal Revenue Service on his 2005 federal income tax return because he failed to produce any documents that substantiated the additional contributions he claimed in accordance with the requirements of I.R.C. § 170. The court also disallowed several business expense deductions in excess of amounts allowed by the Service as Fernandez failed to present sufficient evidence substantiating the deductions, but did allow a certain amount for some of the deductions that the court determined to be reasonable. Finally, the court concluded that Fernandez failed to establish reasonable cause for his failure to timely file and pay taxes, and there ruled him liable for the additions to tax under IRC § 6651(a)(1), IRC § 6651(a)(2), and IRC §6654 assessed by the Service. Westlaw: Fernandez v. Commissioner, T.C., No. 21646-08, T.C. Memo. 2011- 216, 2011 WL 3856849 (September 1, 2011); Web: Fernandez v. Commissioner, T.C., No. 21646-08, T.C. Memo. 2011-216 (September 1, 2011).

Elder Law

LEGISLATION California. Elder Abuse; Identity Theft. California has passed legislation relating to identity theft provisions of the elder abuse statute. The legislation provides that a caretaker

2 © 2011 West, a Thomson Reuters business of an elder or dependent adult, or a person who knows or reasonably should know that the victim is an elder or dependent adult, who violates specified identity theft provisions with respect to the victim's property or personal identifying information is subject to a fine not exceeding $2,500, or by imprisonment in the county jail not exceeding one year, or by both that fine or imprisonment, or alternatively by a fine not exceeding $10,000, or by imprisonment in a state prison for 2, 3, or 4 years, or by both that fine and imprisonment, if the value of the assets taken is of a value exceeding $950. (2011 California Assembly Bill No. 332, California 2011-2012 Regular Session; Title: Elder Abuse.; VERSION: Enrolled; September 08, 2011). Westlaw: 2011 CA A.B. 332 (NS); Web: California Legislature. California. Extension of Mandated Reporting of Financial Abuse of Elders and Dependent Adults. California has passed legislation that to amend and repeal provisions related to elder and dependent adult abuse. The existing Elder Abuse and Dependent Adult Civil Protection Act (which establishes procedures for the reporting, investigation, and prosecution of elder and dependent adult abuse) include provisions which require mandated reporters (such as care custodians of elder or dependent adults and local law enforcement agencies) to report suspected financial abuse. The failure to make such reports is subject to a civil penalty. The legislation extends these provisions indefinitely (without a fixed date), which would have expire on January 1, 2013. The legislation also incorporates additional changes in Section 15630.1 of the Welfare and Institutions Code, proposed by SB 718 (relating to the means of reporting; enrolled version passed 9/1/2011), to be operative only if SB 718 and this bill are both chaptered and become effective on or before January 1, 2012, and this bill is chaptered last. (2011 California Senate Bill No. 33, California 2011-2012 Regular Session; Title: Elder And Dependent Adult Abuse.; VERSION: Enrolled; September 01, 2011). Westlaw: 2011 CA S.B. 33 (NS); Web: California Legislature.

Estate and Gift Taxes

ARTICLES Basis Harvesting. Terence S. Nunan. (Probate and Property, September/October, 2011). Westlaw: 25-OCT Prob. & Prop. 54; Web: Probate and Property (ABA Members only). Flexible Family Trusts: Planning Under TRA 2010 to Obtain Flexibility but Avoid a Tax Disaster. Mark R. Parthemer. (Probate and Property, September/October, 2011). Westlaw: 25-OCT Prob. & Prop. 34; Web: Probate and Property (ABA Members only). Unplugging Great-Grandpa: Curious Consequences of the Current Estate Tax Regime. Alan S. Gassman and Christopher J. Denicolo. (Estate Planning, September, 2011). Westlaw: 38 ESTPLN 39.

IRS DECISIONS, REGULATIONS, AND GUIDANCE IRS. IRS Announces Relief for Large Estates of 2010 Decedents. In IR-2011-91 published on September 13, the IRS announced that estates of people who died in 2010 will have until early next year to file various required returns and pay any estate taxes due, and certain beneficiaries of these estates will receive penalty relief on their 2010 federal income tax returns. The relief is designed to give 2010 estates subject to the estate tax or carryover basis regimes additional time to comply with the tax law changes enacted in late 2010. The announcement also said that the carryover basis form, Form 8939, will be released this fall and noted that the revised versions of the estate tax forms have been posted on the IRS website at IRS.gov. Westlaw: IR-2011-91, 2011 WL 4042769 (September 13, 2011); Web: IR-2011-91, IRS Newsroom (September 13, 2011). IRS. IRS Issues Notice on Due Dates for Filing Various Estate Tax Returns and

3 © 2011 West, a Thomson Reuters business Penalty Relief for Beneficiaries of 2010 Estates. On September 13, the IRS issued Notice 2011-76, which provides that both an automatic six-month extension of time to file Form 706 or Form 706-NA and a six-month extension of time to pay the estate tax will be granted to executors of 2010 estates who file Form 4768 by the due date for filing the returns; substantiation for the extension of time to pay is not required although interest will accrue on any liability from the due date of the return, excluding extensions. The Notice also changed the due date for filing Form 8939 from November 15, 2011, to January 17, 2012. In addition, penalty relief is provided to a beneficiary who has filed their 2010 income tax return reporting the disposition of property acquired from a 2010 estate, and later must amend the return and owe additional tax due to a change in the property’s basis or other pertinent information based upon the estate’s application of I.R.C. § 1022; taxpayer should write across the top of the amended return “IR Notice 2011-76” to alert the IRS that the he or she meets the requirements for reasonable cause to waive any penalty. Westlaw: IRS Notice 2011-76, 2011 WL 4042772 (September 13, 2011); Web: IRS Notice 2011-76, IRS Advanced Notices (September 13, 2011). IRS. Treasury Guidance Plan includes Several Gift, Estate and Trust Projects. On September 2, the Department of the Treasury and Internal Revenue Service issued its 2011- 2012 Priority Guidance Plan which contains 317 projects that the offices intend to actively work on from July 2011 through June 2012. The 17 projects in the plan related to gifts, estates and trusts include regulations under I.R.C. §67 regarding miscellaneous itemized deductions of trusts and estates, guidance on portability of the unified credit between spouses under IRC §2010(c), and final regulations under IRC §2036 regarding graduated grantor retained annuity trusts. Additional projects in the estate and trust arena include final regulations under IRC §642(c) concerning the ordering rules for charitable payments made by a charitable lead trust, and guidance concerning adjustments to sample charitable remainder trust forms under §664. Westlaw: 2011 WL 3872310 (September 6, 2011); Web: 2011-2012 Priority Guidance Plan, IRS Priority Guidance Plans (September 2, 2011). IRS. IRS Re-Proposes Guidance on Estate/Trust Expenses Subject to Two Percent Floor. On September 7, the IRS withdrew proposed regulations published on July 27, 2007 (REG-128224-06, 2007-36 IRB 551) providing guidance on which costs incurred by estates or non-grantor trusts are subject to the 2-percent floor for miscellaneous itemized deductions under I.R.C. § 67(a), and issued new proposed regulations providing guidance on this question along with a notice of a public hearing. The new proposed regs do not require the allocation described in the 2007 guidance which said that if an expense “could” be incurred by an individual it was subject to the 2 percent floor; rather they apply the Supreme Court’s interpretation of IRC § 67(e) in Knight v. Commissioner, 552 U.S. 181 (2008), which held that the deductibility of an expense under IRC § 67(e)(1) depends on whether the cost is “commonly,” or “customarily” incurred when such property is held by an individual investor. The new proposed regs also say that if an investment advisory fee exceeds the fee generally charged to an individual investor and is attributable to an unusual investment objective of the trust or estate or “to a specialized balancing of the interests of various parties such that a reasonable comparison with individual investors would be improper”, that excess is not subject to the 2-percent floor. Westlaw: REG-128224-06, 76 FR 55322-01, 2011 WL 3895884 (September 7, 2011); Web: REG-128224-06, 76 FR 55322-01 (September 7, 2011). IRS. Final Form 706 Released for 2010 Estates. On September 3, the IRS released a final 2010 Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, to be filed for decedents dying in 2010. However, instructions to the form have not yet been released. Form 706 is one of two forms that will be used by estates in 2010 when choosing between the modified carryover basis regime and the estate tax, for property transferred from a decedent in 2010. Westlaw: 2011 WL 3894213 (September 7, 2011); Web: Form 706, IRS Index of Publications (September 8, 2011).

4 © 2011 West, a Thomson Reuters business LEGISLATION North Carolina. State Revenue Agency Announces Revival of Estate Tax. On September 1, the North Carolina Department of Revenue announced that the state’s estate tax is reinstated effective for individuals dying on or after January 1, 2011, if a federal estate tax return is required, as a result of the revival of the federal estate tax under the 2010 Tax Relief Act (Pub. L. No. 111-312). North Carolina statute G.S. 105-32.2(a) imposes an estate tax on a decedent’s estate when a federal estate tax is imposed and the decedent was either a resident of North Carolina or was a nonresident who owned real property in North Carolina or personal property that has a tax situs in the state. According to the Department, although there is no North Carolina estate tax return filed for 2010 decedents, state law conforms to the exclusion amounts and gives those estates that chose to pay federal estate tax and receive the stepped-up basis in property passing through the estate the stepped-up basis for North Carolina purposes. Westlaw: 2011 WL 3840187 (September 1, 2011); Web: Estate Tax Update, North Carolina Department of Revenue Hot Topics (September 1, 2011). Rhode Island. State Tax Division Announces New State Estate Tax Extension Form. Last month, the Rhode Island Division of Taxation announced the creation of the state’s own form for requesting an extension for estate tax purposes. Form RI-4768, Application for Automatic 6 Month Extension of Time to File Rhode Island Estate Tax, allows executors to fill in the fields online, then print out the form for filing with the Division. Prior to release of the new form, estates requesting filing extensions for Rhode Island estate tax purposes had to file copies of the federal extension request or send a letter requesting an extension to the Division. Westlaw: 2011 WL 3856803 (September 2, 2011); Web: Form RI-4768, Rhode Island Division of Taxation (August 2011).

OTHER AICPA. AICPA Issues Comments on Recent IRS Guidance on Carryover Basis Regime. On September 7, the AICPA sent a letter to IRS Commissioner, Douglas Shulman, commenting on Notice 2011-66, which provides guidance on electing into the carryover basis treatment under I.R.C. § 1022 for estates of decedents who died in 2010 and also provides rules applicable to generation-skipping transfers in 2010. The letter expressed concern over the lack of finality regarding basis of assets determined under IRC § 1022 since guidance allows the recipient's basis in an asset to be subject to adjustment upon the IRS’s examination of any tax return reporting a value dependent upon the property's basis, and suggested that, barring fraud or willful attempt to evade tax, a standard period apply for the IRS to challenge taxpayer’s basis, such as three years after the date Form 8939 is filed. In addition, the letter brought to the Service’s attention urgent AMT issues, and requested clarification on whether a basis increase must be allocated for both regular tax and AMT purposes, potentially resulting in assets having different basis for AMT purposes, and guidance on how carryovers/unrealized losses for AMT purposes should be treated. Westlaw: 2011 WL 3973149 (September 7, 2011); Web: AICPA Comments on Notice 2011-66 on Carryover Basis Guidance, Comment Letter (September 7, 2011). ACTEC. ACTEC Members Examine Rules for Electing Carryover Basis Regime. In a September 8 webcast co-sponsored by the American Law Institute -American Bar Association and ACTEC examining the carryover basis guidance provided by recently issued Notice 2011-66 and Rev. Proc. 2011-41, Diana Zeydel, chair of The American College of Trust and Estate Counsel estate and gift tax committee, told listeners the rules for electing to use the carryover basis regime for decedents who died in 2010 are “complicated and very tricky” when trying to determine whether the estate tax regime or carryover basis regime is going to work best for the taxpayer. She noted that the guidance “is helpful but does not provide as many safe harbors as we were hoping for,” explaining that “estate

5 © 2011 West, a Thomson Reuters business practitioners had hoped that the guidance would provide some safe harbors on whether fair market value or basis was lower for property being transferred from the estate of a person who died in 2010.” Released on Aug. 5, Notice 2011-66 addresses procedures for 2010 estates to elect into the carryover basis rules in I.R.C. § 1022 and how a donor may elect out of the automatic allocation of the GST tax exemption to direct skips occurring during 2010, and Rev. Proc. 2011-41 provides optional safe harbor guidance to 2010 estates that electing the carryover basis regime. Westlaw: 2011 WL 3943312 (September 9, 2011). Kentucky. Kentucky Appeals Court Reverses Estate Tax Ruling Relating to Trustee’s Payment of Death Taxes. On September 2, 2011, in an unpublished opinion, the Kentucky Court of Appeals reversed the circuit court’s decision granting summary judgment to PNC Bank, trustee of a trust created under decedent Raphael Avellar’s trust for the benefit of his sister upon his death, in a case relating to the interpretation of provisions of the Avellar’s trust and will relating to payment of federal estate and state inheritance taxes following his after the circuit court held that Avellar’s will mandated the payment of federal estate and state inheritance taxes from money used to fund the sister’s trust. Four contingent beneficiaries under the sister’s trust argued that the taxes should not have been taken from the trust’s funds, while the trustee contended that it had no choice but to pay the taxes the way it did pursuant to the terms of the will. After reviewing the facts, the appeals court concluded that the circuit court erred as a matter of law in finding that the trustee's actions with regard to the payment of the death taxes were mandatory rather than discretionary and reversed the summary judgment. Westlaw: Blanton v. PNC Bank NA, Ky. Ct. App., No. 2010- CA-001142-MR, 2011 WL 3862788 (September 2, 2011); Web: Blanton v. PNC Bank NA, Ky. Ct. App., No. 2010-CA-001142-MR (September 2, 2011). U.S. Tax Court. U.S. Tax Court Rejects IRS Argument that Proceeds from Sale of Annuities was Actually Income. On August 29, the U.S. Tax Court determined that former Enron Corp. CEO Kenneth L. Lay, deceased, and his surviving spouse, had not received income as a result of the sale of two annuity contracts to Enron in 2001 as part of an incentive agreement to abandon his plans for retirement after the sudden resignation of his replacement six months after Lay had retired. The IRS argued that the Lays did not sell the annuity contracts, rather receiving the $10 million as an employee cash bonus includable in income for the 2001 taxable year and assessed a deficiency of $3,910,000. The court however, disagreed, noting that the annuities transaction was “well documented, and all actions of the parties to the transaction reflect that Enron purchased the annuity contracts for $10 million.” Westlaw: Estate of Lay v. Commissioner, T.C., No. 15732-09, T.C. Memo. 2011- 208, 2011 WL 3798532 (August 29, 2011); Web: Estate of Lay v. Commissioner, T.C., No. 15732- 09, T.C. Memo. 2011-208, (August 29, 2011). U.S. Tax Court. Tax Court Finds Value of Property Transferred to FLP Includible in Decedent’s Gross Estate. On August 30, the U.S. Tax Court held that $4.3 million in property the decedent, Clyde W. Turner, Sr., transferred to a family limited partnership, Turner & Co., prior to his death in exchange for a 0.5-percent general partnership interest and a 49.5-percent limited partnership interest is included in his gross estate under I.R.C. § 2036(a), with the included amount to be valued at the fair market value of the assets as of the date of death. After reviewing the facts the court concluded that the transfer was not a bona fide sale for adequate and full consideration as it was not motivated by a legitimate and significant nontax purpose, and that Clyde Sr. retained the right to possess and enjoy the transferred property, as well as the right to designate which person or persons would enjoy the transferred property, by both express and implied agreement. The court also found that premium payments the decedent made prior to his death for life insurance policies held by an irrevocable life insurance trust created by the decedent during life were gifts of present interests in property to the trust beneficiaries and that the IRS must disregard the purported gifts of limited partnership interests in Turner &Co. in calculating Clyde Sr.'s adjusted

6 © 2011 West, a Thomson Reuters business taxable gifts in order to prevent double inclusion of the value of the property transferred to Turner & Co. for transfer tax purposes. Westlaw: Estate of Turner v. Commissioner, T.C., No. 18911- 08, T.C. Memo. 2011-209, (August 30, 2011); Web: Estate of Turner v. Commissioner, T.C., No. 18911-08, T.C. Memo. 2011-209 (August 30, 2011).

Estate and Trust Administration; Probate

LEGISLATION California. Summons Where a Person Files an Objection to the Probate of a Will. California has passed legislation that makes changes to its probate law. Among other things, the act provides that the provisions which authorize a clerk to issue a summons are applicable when a person files an objection to the probate of a will; includes a conservator of a person or estate appointed in accordance with specified provisions in the list of persons who, if a decedent has not otherwise given directions, has the right to control the disposition of the remains of the deceased person vests; and make other technical changes. (2011 California Senate Bill No. 647, California 2011-2012 Regular Session; Title: Civil Law: Omnibus Bill.; VERSION: Adopted; September 20, 2011). Westlaw: 2011 CA S.B. 647 (NS); Web: California Legislature. Ohio. Changes to Probate Code. Ohio has passed legislation which makes amendments to the Probate Code. The act makes numerous changes, including addressing (1) probate court jurisdiction and procedure (replaces "stenographers" and "stenographic reporters" with "court reporters" and replaces "referee" with "magistrate" in the Probate Code); (2) appointment, powers, and duties of executors and administrators (limitation for granting original administration; release from administration; payment of wages of deceased employee without administration; letters testamentary; application for appointment; minority of executor; special administrator; administrator de bonis non; powers during will contest; limitations; collection of assets; new administrator; fees of executor or administrator; public sale of personal property; distribution after settlement; certificate of transfer of real property; apportionment of taxes; inventory--appraisal of property); (3) fiduciaries (residence qualifications of guardian; notice of hearing on fiduciary's account investment authority; prohibited transactions--penalties and exception; mortgage of real property; concealed or embezzled assets; appointment of trustee of funds of unknown or nonresident; action on bond; failure of fiduciary to make payment or distribution); (4) wills (deposit of will; declaration of validity of will; production of will; withholding of will; record of will destroyed; oral will); (5) presentation of certain claims (presentation of contingent claims; proceedings by nonresident executor or administrator to bar creditors' claims; notice on marriage license of penalty for failure to return certificate of solemnized marriage; failure of board of education or governing board to perform duties or fill vacancy; lists of unclaimed costs--publication), and (6) other miscellaneous changes (replaces "petition" with "complaint" in specified proceedings in the probate court.; replaces outdated terminology and makes numerous gender neutralizing; grammatical, and other technical changes throughout the Probate Code; provides that the bill's provisions relating to decedents' estates apply to the estates of decedents who die on or after the act's effective date). The state legislature's website contains a summary of the act's provisions. Westlaw: 2011 OH S.B. 124 (NS); Web: Ohio Legislature (bill) (bill summary).

Estate Planning (Generally)

ARTICLES New Fiduciary Decisions: the Continuing Saga of Joint Bank Accounts. Ronald R.

7 © 2011 West, a Thomson Reuters business Volkmer. (Estate Planning, September, 2011). Westlaw: 38 ESTPLN 42. Taking a Fresh Look at Lifetime Gift Planning Opportunities. Carol G. Kroch, Mary B. Hickok, Donna G. Barwick, and Donald P. Dicarlo, Jr. (Estate Planning, September, 2011). Westlaw: 38 ESTPLN 03. LEGISLATION California. Priorities in Dispositions of Remains. California has passed legislation relating to disposition of remains. The act amends existing law regarding the person or persons who, in an order of succession, have the right to control, and duty of disposition of, the remains of a deceased person if other directions have not been given by the decedent. The act would amend the order to provide that the designation of a person authorized to direct disposition (PADD) on a United States Department of Defense Record of Emergency Data, DD Form 93, as that form exists on December 31, 2011, or its successor form if approved by the State Registrar, will take first priority and be used to establish an agent who has the right and duty of disposition for a decedent who died while on duty in any branch or component of the Armed Forces of the United States, as defined. (Existing law gives first priority to an agent under a power of attorney for health care who has the right and duty of disposition.) However, this provision will become operative only if the form and a specified federal statute are amended to allow a service member to designate any person, regardless of the relationship of the designee to the decedent, as the agent who has the right of disposition of a service member's remains. Other changes in the act are contingent on whether a companion act (SB 647, addressing right to control disposition of remains, which this act amends) is passed and chaptered first (chaptered on 9/21/2011) and becomes effective before 2012. (2011 California Assembly Bill No. 905, California 2011-2012 Regular Session; Title: Disposition Of Remains: Authorized Agent.; VERSION: Adopted; September 26, 2011). Westlaw: 2011 CA A.B. 905 (NS); Web: California Legislature.

Generation-Skipping Transfer Tax

IRS DECISIONS, REGULATIONS, AND GUIDANCE IRS. Section 2642 - Inclusion Ratio. The IRS granted taxpayer a 120 extension to allocate taxpayer’s GST available exemption to the following transfers: A transfer to an irrevocable trust created for the benefit of taxpayer’s descendants after taxpayer and his spouse consented under IRC § 2513 to treat taxpayer's transfers to the trust made in three separate years as made one-half by spouse but taxpayer’s accountant failed to allocate each of their GST exemption to the transfer in year three. Westlaw: PLR 201137001, 2011 WL 4133085 (September 16, 2011); Web: PLR 201137001, IRS Written Determinations (September 16, 2011). A transfer of shares of stock to an irrevocable trust for the benefit of taxpayer’s son and his descendants after the attorney preparing the Form 709 failed to include page four of the return, which reports the allocation of the GST exemption. Westlaw: PLR 201137009, 2011 WL 4133112 (September 16, 2011); Web: PLR 201137009, IRS Written Determinations (September 16, 2011). IRS. Section 1001 - Determination of Amount of and Recognition of Gain or Loss. In a series of rulings, the IRS determined that judicial construction of a trust’s spendthrift provision to allow proposed sales of remainder interests in the trust and the proposed sales of the interests will not affect the trust’s GST exempt, will not result in any taxable gifts for the buyers or sellers and will not give rise to a realization of income to the trust or any of the beneficiaries under I.R.C. § 61 or IRC § 1001; however, each seller will realize gain or loss from the sale of their remainder interest in an amount equal to the difference between the amount realized over the his or her cost to acquire the remainder interest with realized gain

8 © 2011 West, a Thomson Reuters business recognized pursuant to IRC § 1001(c) and loss realized subject to disallowance under IRC § 267(a)(1). Westlaw: PLR 201136011, 2011 WL 3973480; PLR 201136012, 2011 WL 3973481; PLR 201136013, 2011 WL 3973482 PLR 201136014, 2011 WL 3973483, PLR 201136015, 2011 WL 3973484, and PLR 201136016, 2011 WL 3973485 (September 9, 2011); Web: PLR 201136011 , PLR 201136012, PLR 201136013, PLR 201136014, PLR 201136015, and PLR 201136016, IRS Written Determinations (September 9, 2011). IRS. Section 2041 - Powers of Appointment (Included v. Not Included in Gross Estate). The IRS concluded that the exercise by a beneficiary of testamentary non-general powers of appointment over various trusts will not result in any property subject to the powers of appointment being includible in the beneficiary’s estate under I.R.C. § 2041 and will not result in a transfer of property that is subject to generation-skipping transfer tax or affect the property’s GST exempt status. Westlaw: PLR 201136017, 2011 WL 3973486 (September 9, 2011); Web: PLR 201136017, IRS Written Determinations (September 9, 2011). IRS. Section 2631 - GST Exemption. The IRS granted a husband and wife each a 120 extension to allocate their respective available GST exemption to their respective transfers to an irrevocable trust they created for the benefit of their children and each child's issue after the attorney preparing the Forms 709 failed to properly allocate each of their available GST exemptions to the transfers. Westlaw: PLR 201135024, 2011 WL 3870585 (September 2, 2011); Web: PLR 201135024, 2011 WL 3870585 (September 2, 2011).

Health Care

ARTICLES Competitive Pricing and the Challenge of Cost Control in Medicare. (Journal of Health Politics, Policy & Law, August, 2011). Westlaw: 36 J. Health Pol. Pol'y & L. 649. Navigating HIPAA in Claims Litigation. Robert B. Miller, Tegan Schlatter. (GPSolo, September, 2011). Westlaw: 28 No. 6 GPSolo 26.

Interest

IRS DECISIONS, REGULATIONS, AND GUIDANCE IRS: Federal Rates; Adjusted Federal Rates; Adjusted Federal Long-Term Rate and the Long-Term Exempt Rate. Rev. Rul. 2011-22 provides various prescribed rates for federal tax purposes for October 2011. Westlaw: Rev. Rul. 2011-22, 2011 WL 4350009 (September 19, 2011); Web: Rev. Rul. 2011-22; Index of Applicable Federal Rates (AFR) Rulings (September 19, 2011).

Irrevocable Trusts--See Trusts (Generally)

Probate--See Estate/Trust Administration and Probate

Retirement

ARTICLES Penalty-Free Withdrawals from Retirement Accounts. Thomas J. Murphy. (Arizona

IRS DECISIONS, REGULATIONS, AND GUIDANCE IRS. Section 408 - Individual Retirement Accounts. The IRS granted taxpayers a 60- day extension to rollover distributions individual retirement arrangements in the following: Taxpayer asserts that his failure to accomplish a timely rollover was due to an error made by his financial advisor when the advisor incorrectly deposited the distribution into a non-IRA account. Westlaw: PLR 201136029, 2011 WL 3973493 (September 9, 2011); Web: PLR 201136029, IRS Written Determination (September 9, 2011). Taxpayer asserts that her failure to accomplish a timely rollover was due to errors made by her financial advisor when the advisor incorrectly deposited the distribution into a non-IRA account. Westlaw: PLR 201136037, 2011 WL 3973501 (September 9, 2011): PLR 201136037, IRS Written Determination (September 9, 2011). Taxpayer asserts that his failure to accomplish a timely rollover was due to an error made by his financial advisor after the advisor admitted that he incorrectly advised that taxpayer that his IRA could be properly rolled over to a hedge fund managed by advisor’s financial institution. Westlaw: PLR 201136038, 2011 WL 3973502 (September 9, 2011); PLR 201136038, IRS Written Determination (September 9, 2011). IRS. Section 408 - Individual Retirement Accounts. The IRS waived the 60-day rollover requirement for taxpayers’ distributions from individual retirement arrangements in the following:. Distribution received from an inherited annuity after surviving spouse asserts that her failure to accomplish a timely rollover was due to errors made by her financial advisor and the custodial financial institution because of the institution’s erroneous classification of the annuity as a regular, rather than a retirement investment. Westlaw: PLR 201135034, 2011 WL 3870593 (September 2, 2011); Web: PLR 201135034, IRS Written Determinations (September 2, 2011). Distributions received from husband’s and from wife’s IRAs after the couple assert that their failure to accomplish a timely rollover was due to the wife being stricken with a debilitating medical condition and the necessity for the husband to serve as primary caregiver during the rollover period. Westlaw: PLR 201135035, 2011 WL 3870594 (September 2, 2011); Web: PLR 201135035, IRS Written Determinations (September 2, 2011).

OTHER U.S. District Court. Claims in Action Involving Retirement Plan Considered Abusive Tax Shelter Dismissed by Court. On August 29, the U.S. District Court for the Northern District of Texas determined that psychologist Radha Bhatia and her husband cannot continue with many of their claims against the companies that helped them establish an I.R.C. § 412(i) plan and purchase the insurance policy to fund the plan, which was later determined to be an abusive tax shelter. The IRS has cautioned against the potentially illegal use of I.R.C. § 412(i) plans, which are unique “defined benefit” retirement plans comprised entirely of annuities or life insurance contracts that are utilized by small professional service companies, because the plans can potentially serve as abusive tax shelters. The Court concluded the claims were barred by a release signed by the Bhatias when they exchanged their policy after learning the plan was considered abusive, which the court determined to be valid despite the plaintiffs’ claim that the release was procured by fraud, is unconscionable, or void against public policy. Westlaw: Bhatia v. Dischino, N.D. Tex., No. 3:09-cv-01086-B-BD, 2011 WL 3820825 (August 29, 2011); Web: Bhatia v. Dischino, N.D. Tex., No. 3:09-cv- 01086-B-BD (August 29, 2011).

ARTICLES AIC Programs Go Online at West LegalEdcenter. Webinars Available From American Inns of Court. (Lawyer's PC, October 1, 2011). Westlaw: 29 No. 1 Law. PC 4. Browser Considerations. The Selection of a Web Browser Can Impact The Research Process for Legal Professionals. Karl Mattson. (Lawyer's PC, October 1, 2011). Westlaw: 29 No. 1 Law. PC 7. The Ethics of a Personal Connection to the Client. Lance E. Rothenberg. (GPSolo, September, 2011). Westlaw: 28 No. 6 GPSolo 40. It's Three O'Clock in the Morning: Do You Know Where Your Data is? Jeffrey Allen. (GPSolo, September, 2011). Westlaw: 28 No. 6 GPSolo 6. Running a Social Network. Jonathan G. Stein. (GPSolo, September, 2011). Westlaw: 28 No. 6 GPSolo 48. Proliferation of QR Codes. (Lawyer's PC, October 1, 2011). Westlaw: 29 No. 1 Law. PC 5. Using Technology to Improve Client Service. Catherine Sanders Reach. (GPSolo, September, 2011). Westlaw: 28 No. 6 GPSolo 18.

Special Needs Trusts; Guardianships

LEGISLATION Ohio. Changes to Probate Code. Ohio has passed legislation which makes amendments to the Probate Code. The act makes numerous changes, including addressing (1) probate court jurisdiction and procedure (replaces "stenographers" and "stenographic reporters" with "court reporters" and replaces "referee" with "magistrate" in the Probate Code); (2) appointment, powers, and duties of executors and administrators (limitation for granting original administration; release from administration; payment of wages of deceased employee without administration; letters testamentary; application for appointment; minority of executor; special administrator; administrator de bonis non; powers during will contest; limitations; collection of assets; new administrator; fees of executor or administrator; public sale of personal property; distribution after settlement; certificate of transfer of real property; apportionment of taxes; inventory – appraisal of property); (3) fiduciaries (residence qualifications of guardian; notice of hearing on fiduciary's account investment authority; prohibited transactions--penalties and exception; mortgage of real property; concealed or embezzled assets; appointment of trustee of funds of unknown or nonresident; action on bond; failure of fiduciary to make payment or distribution); (4) wills (deposit of will; declaration of validity of will; production of will; withholding of will; record of will destroyed; oral will); (5) presentation of certain claims (presentation of contingent claims; proceedings by nonresident executor or administrator to bar creditors' claims; notice on marriage license of penalty for failure to return certificate of solemnized marriage; failure of board of education or governing board to perform duties or fill vacancy; lists of unclaimed costs – publication), and (6) other miscellaneous changes (replaces "petition" with "complaint" in specified proceedings in the probate court.; replaces outdated terminology and makes numerous gender neutralizing; grammatical, and other technical changes throughout the Probate Code; provides that the bill's provisions relating to decedents' estates apply to the estates of decedents who die on or after the act's effective date). The state legislature's website contains a summary of the act's provisions. Westlaw: 2011

Trusts (Generally)

ARTICLES Choose from an Array of Invasion Standards When Drafting Trusts. Peter B. Tiernan. (Estate Planning, September, 2011). Westlaw: 38 ESTPLN 26. Flexible Family Trusts: Planning Under TRA 2010 to Obtain Flexibility but Avoid a Tax Disaster. Mark R. Parthemer. (Probate and Property, September/October, 2011). Westlaw: 25-OCT Prob. & Prop. 34; Web: Probate and Property (ABA Members only). Proposed Changes to the Ohio Trust Code Affecting PSAs and Private Agreements. Joanne E. Hindel. (Ohio Probate Law Journal, July/August 2011). Westlaw: 21 No. 6 Ohio Prob. L.J. 2.

LEGISLATION Illinois. Notary Public Act. Illinois has passed legislation that amends the Illinois Notary Public Act. The legislation changes the definition of the term “financial institution” to include trust companies in the Notary Public Act. (2011 Illinois House Bill No. 3041, Illinois Ninety-Seventh General Assembly - First Regular Session; Title: Notaries-Trust Companies; VERSION: Adopted; August 23, 2011). Westlaw: 2011 IL H.B. 3041 (NS).Web: Illinois Legislature.

OTHER BNA. IRS Official Says Audits to Focus on High Income, High-Wealth Taxpayers with Reduced Tax Liability Due to Flowthroughs/Trusts. Linda Franke, a senior level adviser with the Small Business/Self Employed Division told attendees of the American Law Institute-American Bar Association tax controversy conference that the IRS’s examination team will focus audits on “individuals with an income of $250,000 or more and total positive income of at least $1 million,” according to a report issued by The Bureau of National Affairs, Inc. The report noted that the Service will pay attention to individuals with wealth whose tax liability is sizably reduced through the use of multiple entities, such as flowthrough entities, trusts, and similar entities. The report said that the IRS will also “pay close attention to taxpayers with multiple years of nonfiling.” Westlaw: 2011 WL 4095499 (September 16, 2011). DOJ. Court Bars Two L.A. Residents from Forming “Common-Law” Trusts. On September 9, the Department of Justice issued a new release announcing that a civil injunction order has been signed by Judge Jacqueline H. Nguyen of the U.S. District Court for the Central District of California after the court permanently barred Gwenn Wycoff and Frank Ozak, both of Los Angeles, from forming “common-law” trusts for others. (United States v. Wycoff, C.D. Cal., No. 2:10-cv-05856-JHN-PLA, injunction filed 9/8/11). The government’s complaint alleged that the two promised that forming the trusts could help them avoid paying taxes because they would “own nothing” but “control everything”, and promoted the scheme through the publication “The Art of Passing the Buck”, a website and personal appearances. The court, however, determined, in preliminarily enjoining the defendants in March 2011, that the trusts are shams, which cost the government more than $1.1 million. Westlaw: 2011 WL 4016242 (September 13, 2011); Web: Two Los Angeles Residents Permanently Barred by Federal Court from Forming Trusts for Taxpayers, Department of Justice Tax Division News (September 8, 2011).

LEGISLATION Ohio. Changes to Probate Code. Ohio has passed legislation which makes amendments to the Probate Code. The act makes numerous changes, including addressing (1) wills (deposit of will; declaration of validity of will; production of will; withholding of will; record of will destroyed; oral will); (2) probate court jurisdiction and procedure (replaces "stenographers" and "stenographic reporters" with "court reporters" and replaces "referee" with "magistrate" in the Probate Code); (3) appointment, powers, and duties of executors and administrators (limitation for granting original administration; release from administration; payment of wages of deceased employee without administration; letters testamentary; application for appointment; minority of executor; special administrator; administrator de bonis non; powers during will contest; limitations; collection of assets; new administrator; fees of executor or administrator; public sale of personal property; distribution after settlement; certificate of transfer of real property; apportionment of taxes; inventory – appraisal of property); (4) fiduciaries (residence qualifications of guardian; notice of hearing on fiduciary's account investment authority; prohibited transactions-- penalties and exception; mortgage of real property; concealed or embezzled assets; appointment of trustee of funds of unknown or nonresident; action on bond; failure of fiduciary to make payment or distribution); ; (5) presentation of certain claims (presentation of contingent claims; proceedings by nonresident executor or administrator to bar creditors' claims; notice on marriage license of penalty for failure to return certificate of solemnized marriage; failure of board of education or governing board to perform duties or fill vacancy; lists of unclaimed costs – publication), and (6) other miscellaneous changes (replaces "petition" with "complaint" in specified proceedings in the probate court.; replaces outdated terminology and makes numerous gender neutralizing; grammatical, and other technical changes throughout the Probate Code; provides that the bill's provisions relating to decedents' estates apply to the estates of decedents who die on or after the act's effective date). The state legislature's website contains a summary of the act's provisions. Westlaw: 2011 OH S.B. 124 (NS); Web: Ohio Legislature (bill) (bill summary).

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With version 2011-2, the Client area of Trust Plus has been redesigned adding new features and capturing additional client information. The screens are bigger and the list of clients is now

A new tab for children has been added to record information for the client's children. In addition to name and address information, there is a drop down to designate whether the individual is a child of the client, the spouse or partner, or both (joint). If the checkbox “Use Client’s Address” is selected, the client’s address will be automatically brought in so that re-entry is not needed.

On the beneficiary screens of Trust and Will Information, there is a new "Add Children" button to add the client's children as beneficiaries, eliminating having to enter the information twice.

14 © 2011 West, a Thomson Reuters business Once the children have been brought into this screen, additional information may be required such as the relationship and guardian information. Additional beneficiaries may also be added. Client and beneficiary information will be carried into the trust or will as appropriate based on phrase selections.

If you have any questions on the Cowles software, support is just a phone call away using the following numbers:

• License activations - Customer Technical Support, 1-800-366-1730 (option 1) • Questions about your West account or requests to add/remove Members Only or Listserve access - Customer Service, 1-800-366-1730 (option 2) • Content questions and questions on how to use the software - Reference Attorneys, 1-800- 277-9378 (option 3) • Technical software problems and questions (installation, networking, technical errors) - Customer Technical Support, 1-800-366-1730 (option 4) • Sales of supplies (Estate Organizer Binders, client booklets, etc.) - Inside Sales, 1-800-366- 1730 (option 5) • To schedule training on using the software - Telephone Training, 1-800-328-0109 (option 1)