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<p>Dang y'all. Phil just dropped the mic.</p>
<div class="moz-cite-prefix">On 1/10/2019 11:04 AM, Philip N. Jones
wrote:<br>
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<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">A transfer pursuant to a TEDRA would also
be a gift unless is it backed up by a bona fide enforceable
cause of action.<span
style="font-size:11.0pt;font-family:"Calibri",sans-serif">
</span>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
<i>Grossman v. Campbell</i>, 368 F.2d 206, 18 AFTR2d 6251 (5<sup>th</sup>
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 <i>Commissioner
v. Vease</i>, 314 F.2d 79, 11 AFTR2d 1800 (9<sup>th</sup>
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
<i>Wolfsen v. Smyth,</i> 223 F.2d 111 (9<sup>th</sup> Cir.
1955); <i>Bath v. Commissioner</i>, T.C. Memo 1975-102.
Other examples of settlements or trust modifications that were
disregarded for tax purposes include
<i>Aronson v. Commissioner</i>, T.C. Memo 2003-189; <i>Brandon
v. Commissioner</i>, 86 T.C. 327 (1986), rev’d on other
grounds, 828 F.2d 493 (8<sup>th</sup> Cir. 1987), on remand 91
T.C. 829 (1988);
<i>Simpson v. Commissioner</i>, T.C. Memo 1994-259; <i>Crown
Income Charitable Fund v. Commissioner, 8 F.3d 571
</i>(7<sup>th</sup> Cir. 1993); <i>La Meres v. Commissioner</i>,
98 T.C. 294 (1992); CCA 201651013; see also Rev. Rul. 89-31,
1989-1 C.B. 277.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Phil Jones<o:p></o:p></p>
<p class="MsoNormal">Portland, OR<span
style="font-size:11.0pt;font-family:"Calibri",sans-serif;color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span
style="font-size:11.0pt;font-family:"Calibri",sans-serif;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><span
style="font-size:11.0pt;font-family:"Calibri",sans-serif">From:</span></b><span
style="font-size:11.0pt;font-family:"Calibri",sans-serif">
<a class="moz-txt-link-abbreviated" href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>
[<a class="moz-txt-link-freetext" href="mailto:wsbapt-bounces@lists.wsbarppt.com">mailto:wsbapt-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>Christopher Sm<br>
<b>Sent:</b> Thursday, January 10, 2019 10:44 AM<br>
<b>To:</b> WSBA Probate & Trust Listserv
<a class="moz-txt-link-rfc2396E" href="mailto:wsbapt@lists.wsbarppt.com"><wsbapt@lists.wsbarppt.com></a><br>
<b>Subject:</b> Re: [WSBAPT] wrongfully excluded heir<o:p></o:p></span></p>
<p class="MsoNormal"><o:p> </o:p></p>
<div>
<div>
<p class="MsoNormal">Could you do a partial assignment of
interest? Or is that treated as a gift?<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal"><o:p> </o:p></p>
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<div>
<p class="MsoNormal">Cheers,<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal">Christopher
Small<o:p></o:p></p>
</div>
</div>
<div>
<p class="MsoNormal"><a
href="http://cmslawfirm.com"
target="_blank"
moz-do-not-send="true">CMS Law
Firm LLC</a><o:p></o:p></p>
</div>
<div>
<p class="MsoNormal">150 Lake St. S.,
Suite 218<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal">Kirkland, WA
98033<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal">206.659.1512<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal"><o:p> </o:p></p>
</div>
<div>
<p class="MsoNormal"><o:p> </o:p></p>
</div>
<div>
<p class="MsoNormal">Legal stuff I
have to put in... <i>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 taxpayer under the
Internal Revenue Code; or (ii)
promoting, marketing, or
recommending to another party any
transaction or matter addressed
herein (or any attachments).</i><o:p></o:p></p>
</div>
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<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
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<div>
<p class="MsoNormal">On Thu, Jan 10, 2019 at 10:42 AM Eric
Nelsen <<a href="mailto:Eric@sayrelawoffices.com"
moz-do-not-send="true">Eric@sayrelawoffices.com</a>>
wrote:<o:p></o:p></p>
</div>
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<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">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).</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D"> </span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">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.</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D"> </span><o:p></o:p></p>
<div>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">Sincerely,</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D"> </span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">Eric</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D"> </span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">Eric C. Nelsen</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">SAYRE LAW OFFICES, PLLC</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">1417 31st Ave South</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">Seattle WA 98144-3909</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">phone 206-625-0092</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D">fax 206-625-9040</span><o:p></o:p></p>
</div>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="color:#1F497D"> </span><o:p></o:p></p>
<div>
<div style="border:none;border-top:solid windowtext
1.0pt;padding:3.0pt 0in 0in
0in;border-color:currentcolor currentcolor">
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">From:</span></b><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">
</span><a
href="mailto:wsbapt-bounces@lists.wsbarppt.com"
target="_blank" moz-do-not-send="true"><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">wsbapt-bounces@lists.wsbarppt.com</span></a><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">
[mailto:</span><a
href="mailto:wsbapt-bounces@lists.wsbarppt.com"
target="_blank" moz-do-not-send="true"><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">wsbapt-bounces@lists.wsbarppt.com</span></a><span
style="font-size:10.0pt;font-family:"Tahoma",sans-serif">]
<b>On Behalf Of </b>Allen Draher<br>
<b>Sent:</b> Thursday, January 10, 2019 10:14 AM<br>
<b>To:</b> WSBA Probate & Trust Listserv<br>
<b>Subject:</b> [WSBAPT] wrongfully excluded
heir</span><o:p></o:p></p>
</div>
</div>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"> <o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto">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.
<o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"> <o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b>Allen
Draher</b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b> </b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b>Law
Office of Allen Draher, PLLC</b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b>5426
California Ave. S.W.</b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b>Seattle,
WA 98136</b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b> </b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b>ph
206-935-2998</b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><a
href="mailto:allen@draherlaw.com" target="_blank"
moz-do-not-send="true"><b>allen@draherlaw.com</b></a><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b> </b><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="font-size:10.5pt;font-family:Consolas">__________________________________________________________</span><o:p></o:p></p>
<p class="MsoNormal"
style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><span
style="font-size:10.5pt;font-family:Consolas"> </span><o:p></o:p></p>
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<p class="MsoNormal">_______________________________________________<br>
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<pre class="moz-quote-pre" wrap="">_______________________________________________
WSBAPT mailing list
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<pre class="moz-signature" cols="72">--
Felicia Value
Attorney at Law
PO Box 578/116 N. Third
La Conner, WA 98257
(360) 466-2088
<a class="moz-txt-link-abbreviated" href="mailto:Felicia@skagitprobate.com">Felicia@skagitprobate.com</a></pre>
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