Thursday, June 22, 2018

“You Snooze, You Lose!”

The following post was written by Klein DeNatale Goldner attorneys Kurt Van Sciver, a partner in the firm’s trusts and estates litigation department, and Vincent J. Oddo, an associate in the firm’s estate planning department. DISCLAIMER: this post is intended for informational and educational purposes only and should not be construed as legal advice.

In Estate of Casserley, a California appellate court reminds restitution creditors to be proactive in recording their judgments at the risk of losing it all on the death of the debtor. Failure to take action may leave a creditor with little to no recourse against a deceased debtor’s estate.

During his lifetime, Decedent was convicted of a crime against his neighbor. As a result, Decedent was ordered to pay restitution to Neighbor. Neighbor recorded the order and subsequently obtained an amended order for an increased award. Neighbor recorded an assignment of the original order to his wife. But, the amended order was not recorded until after Decedent’s death.

Decedent’s estate was not able to pay all filed creditors’ claims. Neighbor’s Wife filed a creditor’s claim based on the original order, which was allowed and paid. But, the administrator of the Decedent’s estate rejected an amended claim based on the amended order. Neighbor’s Wife argued (1) that the post-death recordation of the amended order resulted in an enforceable lien against the Decedent’s probate assets, and (2) her claim to restitution was entitled to priority over other creditors’ claims.

The trial court rejected the arguments of the Neighbor’s Wife, and the appellate court affirmed. An abstract of judgment filed after a debtor’s death is not an enforceable lien on estate property; further, a creditor entitled to criminal restitution is not entitled to priority of payment in the debtor’s estate.

To read the full opinion, click here: http://www.courts.ca.gov/opinions/documents/D072298.PDF

To view the professional biography of Kurt Van Sciver, click here: http://www.kleinlaw.com/Attorneys/Kurt-D-Van-sciver.shtml

To view the professional biography of Vincent J. Oddo, click here: http://www.kleinlaw.com/Attorneys/Vincent-J-Oddo.shtml.

 

Friday, October 6, 2017

Trump Administration: Tax Code

The following post was written by Kevin C. Findley and Vincent J. Oddo, estate planning attorneys with Klein DeNatale Goldner, LLP. DISCLAIMER: this post is intended for informational and educational purposes only and should not be construed as legal advice.

The Trump administration recently released its consolidated framework of proposed changes to the tax code intended to provide tax relief and create other simplified procedures. But, these proposals leave out critical details. Notably, in its proposal to repeal the “death tax” and generation-skipping tax, left unaddressed is the exact meaning of “death tax” (although it seems that term means the Federal estate tax) as well as the future of the Federal gift tax. Further, the proposal does not indicate whether a carry-over income tax basis regime or recognition of capital gains at death would be implemented if the estate tax is repealed. The “Unified Framework for Fixing Our Broken Tax Code” can be found here: https://www.treasury.gov/…/pres…/Documents/Tax-Framework.pdf.

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Friday, September 15, 2017

Estate of Minnie Lynn Sower

The following post was written by Klein DeNatale Goldner attorneys Chris Hamilton, who practices in the firm’s estate planning and tax controversy departments, and Vincent J. Oddo, who practices in the firm’s estate planning and probate department. DISCLAIMER: this post is intended for informational and educational purposes only and should not be construed as legal advice.

The Tax Court recently espoused the IRS’s authority to audit the estate tax return of the first spouse to die for purposes of determining the estate tax liability of the second spouse, where the first spouse’s estate elected portability. In Estate of Sower, Husband died first and his estate elected portability. The IRS subsequently issued Closing Letter 627 to Husband’s estate, which showed no estate tax liability. Upon Wife’s death, the IRS conducted an audit of her estate tax return. For purposes of determining Wife’s estate tax liability, the IRS reviewed Husband’s estate tax return and determined that the deceased spousal unused exclusion amount (DSUE) was overstated, resulting in a deficiency in Wife’s estate tax return. Wife’s estate argued that the IRS should be estopped from examining Husband’s return and should not be allowed to adjust the DSUE amount since Husband’s estate tax return had been accepted as filed. The Court found that Closing Letter 627 did not serve as an agreement by the IRS not to reopen Husband’s matter. Further, Wife’s estate argued that the IRS’s examination of Husband’s return was an improper second examination, which the Court rejected since the IRS did not obtain any new information. Although the period of limitations on assessment of Husband’s estate had expired, the IRS still retained the power to examine estate tax return to determine the proper DSUE amount. For the full Tax Court opinion, click here: https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx….

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Friday, August 25, 2017

Estate of Frederick Alan Simmons

The following post was written by Kevin C. Findley and Vincent J. Oddo, estate planning attorneys with Klein DeNatale Goldner, LLP. DISCLAIMER: this post is intended for informational and educational purposes only and should not be construed as legal advice.

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Friday, August 18, 2017

US v Harris: 9th Circuit Erodes Spendthrift Trust Protections

The following post was written by Klein DeNatale Goldner attorneys Kurt D. Van Sciver, who practices in the firm’s trusts and estates litigation department, and Vincent J. Oddo, who practices in the firm’s estate planning department. DISCLAIMER: this post is intended for informational and educational purposes only and should not be construed as legal advice.

In U.S. v. Harris, the 9th Circuit recently eroded the asset protections of third-party discretionary spendthrift trusts. The appellant, Michael Harris, was ordered to pay restitution in an unrelated criminal case. In an attempt to satisfy his obligation, the government applied for a writ of continuing garnishment for property distributed to Harris from two irrevocable, discretionary trusts established for his support. These trusts included spendthrift clauses. Since Harris had a right to receive trust distributions, his interests in the trusts were not a mere expectation. Although Harris disclaimed his interests in the trusts, the court held that these disclaimers were inoperative to prevent the attachment. The government did not have the authority to compel trust distributions; rather, any current or future trust distributions would be subject to the continuing writ of garnishment until Harris’s restitution obligation was satisfied. Despite the trusts’ intended protections, these assets were not immune from a federal lien. This decision becomes critical for practitioners who draft trusts for the purpose of asset and creditor protection. To learn more about the 9th Circuit’s reasoning, click here: http://cdn.ca9.uscourts.gov/…/opini…/2017/04/20/16-10152.pdf

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Friday, August 11, 2017

California Supreme Court Decision Addressing Documentary Transfer Taxes

The following post was written by Kevin C. Findley and Vincent J. Oddo, estate planning attorneys with Klein DeNatale Goldner, LLP. DISCLAIMER: the content of this post is provided for informational and educational purposes only and should not be construed as legal advice.

For quite some time, cities and counties throughout California have imposed a documentary transfer tax on the direct transfer of property. Historically, the indirect transfers of ownership interests in real estate owning entities have evaded such taxes. When an ownership interest in a legal entity is transferred, the entity must file a Statement of Change of Ownership with the Board of Equalization, which may potentially trigger a reassessment for property tax purposes. Until recently, these real estate owning entities avoided documentary transfer taxes since direct transfers of real property were not involved. The California Supreme Court closed this loophole in its recent decision in 926 North Ardmore Avenue, LLC v. County of Los Angeles. In its decision, California’s high court held that a documentary transfer tax may be imposed where there is a transfer of beneficial ownership in a real estate owning entity and the transfer is made for consideration. As a result of the Court’s conflation of the property tax and documentary transfer tax regimes, these filed Statements now give county recorder offices the authority to demand payment of documentary transfer taxes for these indirect transfers. But, Ardmore only addresses the narrow context of transferring beneficial interests in real estate owning entities; this becomes significant in the context of estate planning and trust administration where indirect transfers of beneficial interests in property may not involve a filing with the Board of Equalization. The full opinion can be found here:
http://www.courts.ca.gov/opinions/documents/S222329.PDF