Tuesday, November 29, 2011

Nevada Passes Legislation to Protect the Elderly

Nevada recently passed legislation to protect the elderly from exploitation on transfers of property after death.  Unfortunately, the elderly are often targets of financial exploitation. We often hear tragic stories of caregivers or others deceiving the elderly by fraud or undue influence and convincing them into leaving the exploiter a large inheritance. In its most recent legislative session, Nevada passed a law to protect the elderly from certain types of fraud and undue influence relating to transfers occurring after death.

The new law creates a presumption that a transfer occurring after the date of death is void if the recipient is:

a) The person who drafted the transfer document;

b) The transferor’s caregiver;

c) A person who paid or arranged for the drafting of the document; or

d) A person who is related to, affiliated with, or subordinate to anyone described in (a), (b), or (c).

The law provides that the presumption does not apply where the transfer does not exceed what the recipient would have received if the decedent died intestate or without a will. The presumption that the transfer is void can be overcome if a court determines by clear and convincing evidence that the transfer was not the product of fraud, duress, or undue influence.

We think the new statute is a positive change and we hope this new law will play a large role in protecting the elderly in the state of Nevada.

Monday, November 21, 2011

Gift Tax Opportunity...For a Limited Time Only!

This is not a sales advertisement. There are no echoing voices, special interest rates, nor any free no-name flat screen TV’s – but the ability to gift up to $5 Million is truly (probably) a limited opportunity.

The changes to the Federal estate and gift tax that were passed in late December, 2010, re-unified the estate tax and gift tax exemption amounts at $5 Million through the end of 2012. In 2013, the estate and gift tax exemption amount will return to $1 Million unless Congress changes the exemption prior to December 31, 2012. We have heard recent rumors that the Joint Select Committee on Deficit Reduction of Congress (the so-called “Super Committee”) may have suggestions for reducing the gift tax exemption from its current $5 Million level. This could happen before the end of the year in theory. If so, the change would be one year earlier than expected.

So what we thought was a limited opportunity to make lifetime gifts in excess of $1 Million may really be shorter than even originally expected.

But Why Should I Give Assets Away During Life?

Transferring assets with a lifetime gift is more favorable from a net tax perspective than relying upon transfers occurring upon death. This is because gift tax is calculated on the net value of the assets transferred (exclusive of the gift tax paid) while the estate tax is calculated by including all assets transferred including the money that will be used to pay the tax (tax inclusive). The uncertainty of the current exemption amount ($5 Million) and its duration makes today a unique opportunity that may not last.

Please consult with an experienced attorney for advice on how to make completed gifts to family members or friends within the confines of a trust in order to prevent unrestricted use of the gifted assets. There are also tax implications of the gift, such as the requirement of filing a gift tax return, that should be discussed with an attorney or CPA. When a lifetime gift amount is accompanied by other advanced estate planning techniques that our attorneys can assist you with, it is possible to greatly reduce or eliminate estate tax upon your death.

Friday, November 18, 2011

December AFR's Announced

December Mid-Term AFR - up from 1.20% in November.

Wednesday, November 2, 2011

Nevada Legislature Expands Applicability of "No Contest" Clauses

No contest clauses in a Trust and Will have been discussed previously in this blog. A no contest clause is a provision in a Trust or Will that provides that any beneficiary challenging the validity of the terms of the Trust or Will shall have his or her share reduced or eliminated. Nevada law has recognized the validity of no contest clauses with certain exceptions.

Along with these legal exceptions, many courts in the past have held that the actions of the beneficiary must directly relate to the Trust or Estate itself and/or an actual lawsuit must be filed in court in order for a no contest clause to be enforceable. The last session of the Nevada Legislature has expanded the existing law to make it clear that, with certain important exceptions, a beneficiary’s share may be reduced or eliminated under a no contest clause by conduct contrary to the express wishes of the Decedent as set forth in the Decedent’s Trust or Will. Under the new law, which is effective October 1, 2011, conduct by a beneficiary that could trigger a no contest clause may include, without limitation:

1. Conduct other than formal court action; and

2. Conduct which is unrelated to the Trust or Estate itself, including, without limitation:

a. The commencement of civil litigation against the Decedent’s Trust or probate Estate or family members;

b. Interference with the administration of another Trust or Estate or a business entity;

c. Efforts to frustrate the intent of the Decedent’s power of attorney; and

d. Efforts to frustrate the designation of beneficiaries related to a nonprobate transfer by the Decedent by operation of law or by operation of contract such as joint tenancy, payable on death designations, and contractual beneficiary designations.

However, the new law specifically states that a no contest clause will not be enforced if the beneficiary seeks only to:

1) Enforce the terms of the Trust or Will, any document referenced in or affected by the Trust or Will, or any other Trust or Will related document;

2) Enforce the beneficiary’s legal rights related to the Trust or Will, any document referenced in or affected by the Trust or Will, or any other Trust or Will related document;

3) Obtain a court ruling with respect to the construction or legal effect of the Trust or Will, any document referenced in or affected by the Trust or Will, or any other related Trust or Will.

Also a no contest clause is unenforceable, notwithstanding its terms, if the court finds that the challenge to the Trust or Will, any document referenced in or affected by the Trust or Will, or any other Trust or Will related document was made in good faith based on probable cause.

Except for these four exceptions, it is now clear under Nevada law that a beneficiary could see his or her share of the Trust or Estate reduced or eliminated via a no contest clause even though the actions of the beneficiary do not directly relate to the Trust or Estate itself and/or the beneficiary does not bring a formal action in court challenging the validity of the terms of the Trust or Will.

 - Attorney John Mugan