[WSBAPT] wrongfully excluded heir

Felicia Value felicia at skagitprobate.com
Thu Jan 10 11:38:34 PST 2019


Dang y'all.  Phil just dropped the mic.

On 1/10/2019 11:04 AM, Philip N. Jones wrote:
>
> An assignment would be a taxable gift, but (as has been noted) a gift 
> is not really taxable unless the donor has enough assets to be subject 
> to the federal estate tax.  But watch out for a 
> spendthrift/nonassignment clause. Which leads us to TEDRA.
>
> A transfer pursuant to a TEDRA would also be a gift unless is it 
> backed up by a bona fide enforceable cause of action.If a bona fide 
> dispute exists between the beneficiaries, and the agreement is 
> intended to resolve that dispute, then the resulting transfer will not 
> constitute a gift, but instead will constitute a settlement in 
> satisfaction of the dispute.  In such a situation, the agreement 
> should recite the nature of the dispute and the fact that the altered 
> division of the property is intended to resolve that dispute. For 
> somewhat greater certainty that the result will be honored by the IRS, 
> the aggrieved beneficiary should first file a will contest, a petition 
> for instructions, an objection to the final account, or some other 
> appropriate pleading to lend greater credence to the notion that a 
> bona fide dispute exists.  However, neither the IRS nor the courts 
> will respect a settlement based on “friendly” litigation where no bona 
> fide dispute is present.  For example, in /Grossman v. Campbell/, 368 
> F.2d 206, 18 AFTR2d 6251 (5^th Cir. 1966), the court held that a 
> settlement agreement had been reached in a situation where no real 
> dispute existed, and thus the settlement would be ignored for estate 
> tax purposes. The Ninth Circuit reached a similar result in 
> /Commissioner v. Vease/, 314 F.2d 79, 11 AFTR2d 1800 (9^th Cir. 1963), 
> rev’g. 35 T.C. 1184 (1961).  In that case, the court concluded that a 
> settlement agreement had not resulted from a bona fide will contest, 
> but instead had resulted from “nothing more than a voluntary 
> rearrangement of property interests acquired under an admittedly valid 
> will.”  See also /Wolfsen v. Smyth,/ 223 F.2d 111 (9^th Cir. 1955); 
> /Bath v. Commissioner/, T.C. Memo 1975-102. Other examples of 
> settlements or trust modifications that were disregarded for tax 
> purposes include /Aronson v. Commissioner/, T.C. Memo 2003-189; 
> /Brandon v. Commissioner/, 86 T.C. 327 (1986), rev’d on other grounds, 
> 828 F.2d 493 (8^th Cir. 1987), on remand 91 T.C. 829 (1988); /Simpson 
> v. Commissioner/, T.C. Memo 1994-259; /Crown Income Charitable Fund v. 
> Commissioner, 8 F.3d 571 /(7^th Cir. 1993); /La Meres v. 
> Commissioner/, 98 T.C. 294 (1992); CCA 201651013; see also Rev. Rul. 
> 89-31, 1989-1 C.B. 277.
>
> Phil Jones
>
> Portland, OR
>
> *From:*wsbapt-bounces at lists.wsbarppt.com 
> [mailto:wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Christopher Sm
> *Sent:* Thursday, January 10, 2019 10:44 AM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] wrongfully excluded heir
>
> Could you do a partial assignment of interest? Or is that treated as a 
> gift?
>
> Cheers,
>
> Christopher Small
>
> CMS Law Firm LLC <http://cmslawfirm.com>
>
> 150 Lake St. S., Suite 218
>
> Kirkland, WA 98033
>
> 206.659.1512
>
> Legal stuff I have to put in... /To ensure compliance with Treasury 
> Department and IRS regulations, we inform you that, unless expressly 
> indicated otherwise, any federal tax advice contained in this 
> communication (including any attachments) is not intended or written 
> by CMS Law Firm LLC to be used, and cannot be used by the taxpayer, 
> for the purpose of: (i) avoiding penalties that may be imposed on the 
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>
> On Thu, Jan 10, 2019 at 10:42 AM Eric Nelsen <Eric at sayrelawoffices.com 
> <mailto:Eric at sayrelawoffices.com>> wrote:
>
>     Lots of tax implications if it's done by any method other than
>     inheritance. I have done the heirs-gift-to-excluded-child method
>     but only where the individual gifts were below the federal annual
>     gift exclusion limit (currently $15,000, but lower back when I did
>     this in a case).
>
>     I think best bet on your facts, assuming there isn't a fact
>     problem I don't know about, is a TEDRA Agreement executed by all
>     heirs, indicating that the Will should be reformed because its
>     provision concerning the excluded sibling is in dispute, that
>     everyone agrees that the true intent of the testator was to
>     provide equal benefit to all children, that the testator made a
>     mistake of fact in excluding the sibling (not realizing that the
>     expected benefit was not received or was not certain to be
>     received), and that but for that mistake, the testator would have
>     included all children as equal heirs. And therefore, the heirs all
>     agree that the Estate should be split in equal shares. That way
>     everyone gets the distribution as inheritance and the tax
>     implications go away.
>
>     Sincerely,
>
>     Eric
>
>     Eric C. Nelsen
>
>     SAYRE LAW OFFICES, PLLC
>
>     1417 31st Ave South
>
>     Seattle WA  98144-3909
>
>     phone 206-625-0092
>
>     fax 206-625-9040
>
>     *From:*wsbapt-bounces at lists.wsbarppt.com
>     <mailto:wsbapt-bounces at lists.wsbarppt.com>[mailto:wsbapt-bounces at lists.wsbarppt.com
>     <mailto:wsbapt-bounces at lists.wsbarppt.com>] *On Behalf Of *Allen
>     Draher
>     *Sent:* Thursday, January 10, 2019 10:14 AM
>     *To:* WSBA Probate & Trust Listserv
>     *Subject:* [WSBAPT] wrongfully excluded heir
>
>     I’m meeting with a potential client.  She is the named PR in
>     parent’s will.  Estate passes to all but one sibling.  This
>     sibling was excluded because of some benefit to be received that
>     wasn’t and all other siblings want to divide estate among all
>     siblings. Each share will be several hundred thousand dollars, but
>     estate will be under WA State Estate Tax limit.  I suppose each
>     sibling could gift to the excluded sibling and file Federal Gift
>     Tax Returns.  With the current federal exclusion amounts not
>     likely to be an issue using some of the existing credit, but who
>     knows what the future will bring.  Has anyone a more creative
>     solution they’ve used?  Have excluded sibling file a creditor’s
>     claim that is approved by the PR with non-intervention powers?  (I
>     would have other siblings consent in writing).  TEDRA?  Thank you.
>
>     *Allen Draher*
>
>     **
>
>     *Law Office of Allen Draher, PLLC*
>
>     *5426 California Ave. S.W.*
>
>     *Seattle, WA 98136*
>
>     **
>
>     *ph 206-935-2998*
>
>     *allen at draherlaw.com* <mailto:allen at draherlaw.com>
>
>     **
>
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-- 
Felicia Value
Attorney at Law
PO Box 578/116 N. Third
La Conner,  WA 98257
(360) 466-2088
Felicia at skagitprobate.com

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