Wills and Trusts

Wyatt, Tarrant & Combs, LLP


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You Are Under Attack!

By Turney P. Berry

Blue ribbon pears at the Kentucky State Fair

Blue ribbon pears at the Kentucky State Fair

Yes, You. If you have an interest in a family business or benefit from a family business – and that is almost all of us  – then you should know that on August 2 the IRS unveiled a proposal specifically designed to increase the taxes paid by family business owners versus the unrelated owners of identical businesses. Family farms, investment companies, real estate investors and developers, every sort of business and business entity are included within the scope of the IRS proposal. Thus you need to take immediate action.

What does this new proposal do? Let’s consider a business with four equal owners that’s worth $10,000,000. The economic reality is that none of those co-owners could sell a one-quarter interest for $2,500,000. Appraisers tell us that minority interests – less than 50% of the vote – in privately held businesses should be discounted by 30% – 40% in a typical situation, although sometimes more or less depending on the facts in the real world.

Now let’s move from the real world to the world of the IRS. If the four owners are unrelated, then real world rules will apply. But if they are family members the Continue reading


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Turney Berry co-authors article on the revised Uniform Fiduciary Access to Digital Assets Act for the publication “Trusts & Estates”

Turney Berry, member of Wyatt’s Trusts, Estates & Personal Planning Service Team, co-authored an article that was published in the November issue of Trusts & Estates.  The article, “You Can’t Always Get What You Want: Understanding the revised Uniform Fiduciary Access to Digital Assets Act,” outlines the original and revised versions of the Act, and describes impediments to digital asset access that may arise for a fiduciary.

Click here to view the full article.


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Heckerling 2015

Estate_PlanningEarlier this month over 3,000 estate planning professionals comprised of Attorneys, Financial Planners, CPAs, Trust Administrators and others gathered in Orlando, Florida for the nation’s leading estate planning conference, the Heckerling Institute on Estate Planning.  Now celebrating its 49th year, Heckerling is designed for sophisticated attorneys, trust officers, accountants, insurance advisors, and wealth management professionals who are familiar with the principles of estate planning, but still offers fundamental programs to refresh and reinforce the basic theories underlying the most sophisticated plans. If you were not able to attend this week-long event filled with tax and non-tax planning topics, recent developments and other insightful tidbits of information, the American Bar Association’s Real Property Trust and Estate Section has a group of volunteers who report on each lecture at Heckerling.  These reports are emailed through the RPTE listserve and are available on their website.  One of Wyatt’s associates, Beth Anderson, was an ABA reporter this year, and you can read her reports as well as all the other reports here.


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Tennessee Tenancy by the Entirety Joint Revocable Trust

Codified as Public Chapter 829 and signed by Governor Haslam into law on April 29, 2014, a new form of joint trust is available for transfers to trusts on or after July 1, 2014. Although the trust is not named by the statute, the trust substantially resembles the common law form of property known as tenancy by the entirety. Some practitioners have appropriately referred to this trust as the “marital asset protection trust.” I previously discussed this subject here, albeit briefly.

This statute has been codified as T.C.A. § 35-15-510.

Common law tenancy by the entirety. Before I get into the finer points of the TE Trust, a refresher on how tenancy by the entirety works in general (and its benefits) is appropriate.  Tenancy by the entirety is a special form of joint tenancy Continue reading


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State Reformation to Update Provisions Left Over From the Original GST Did Not Create New GST Problems

In PLR 201322025 a decedent’s GST trust called for a distribution of $250,000 to a son’s trust, a number tied to the GST in effect before 1986. The trust contained a provision to update the $250,000 amount if the Code changed. When the decedent died in 1987 the executor exempted all of the assets from GST and now the trustee has obtained a court order to distribute all of the assets to the son’s trust. The IRS determined there were no adverse GST, gift, or estate tax consequences.

Turney P. Berry
Louisville, Kentucky


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Conversion to Unitrust Did Not Affect GST Tax Grandfathered Status

In PLR 201320009 the place of administration of a trust had been moved from one state to another. However, the court order granting the move provided that the law of the original state would govern the validity and construction of the trust. When the trustee wanted to convert the distribution provisions to a unitrust, it applied the law of the original state, which had adopted a unitrust statute.

Moving the place of administration without changing the governing law, as here, is often helpful to ensure no inadvertent change that might affect a grandfathered trust.

Turney P. Berry
Louisville, Kentucky


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Late Disclaimer OK: Disclaimer within Nine Months of Awareness

In PLR 201334001 the IRS determined disclaimers were timely on the following facts:

Grantor created Trusts several years before his death on Date 1, a date before January 1, 1977, for the benefit of the lawful lineal descendants of his daughter (Daughter), per stirpes. Daughter’s son, Grandson is the current beneficiary of Trusts. Upon the death of Grandson, Grandson’s son (Taxpayer) will be entitled to income distributions from Taxpayer’s per stirpital share of Trusts. The income distributions will continue until the earlier of Taxpayer’s death or the perpetuities date. Upon termination of each of the Trusts, any remaining trust property will be distributed to Taxpayer and Taxpayer’s brother, per stirpes.

Taxpayer, who is over 18 years of age, represents that Taxpayer learned of the transfers creating his interests in Trusts on Date 2. Taxpayer further represents that he had no knowledge that he possessed any interest in Trusts, prior to Date 2. Taxpayer proposes to execute and timely file and deliver a written disclaimer to the trustees for each of Trust 1, Trust 2, Trust 3, and Trust 4, on or before Date 3, stating that he irrevocably, unconditionally and without qualification, disclaims and refuses to accept any interest that would otherwise pass to Taxpayer under the relevant provisions of Trusts. The disclaimers will be valid under Statute 1 and Statute 2. Date 3 is a date occurring not more than nine months after Date 2.

The ruling states:

Section 25.2511-1(c)(2) of the Gift Tax Regulations provides, in relevant part, that, in the case of taxable transfers creating an interest in the person disclaiming made before January 1, 1977, where the law governing the administration of the decedent’s estate gives a beneficiary, heir, or next-of-kin a right completely and unqualifiedly to refuse to accept ownership of property transferred from a decedent (whether the transfer is effected by the decedent’s will or by the law of descent and distribution), a refusal to accept ownership does not constitute the making of a gift if the refusal is made within a reasonable time after knowledge of the existence of the transfer. The refusal must be unequivocal and effective under the local law. There can be no refusal of ownership of property after its acceptance. In the absence of the facts to the contrary, if a person fails to refuse to accept a transfer to him of ownership of a decedent’s property within a reasonable time after learning of the existence of the transfer, he will be presumed to have accepted the property.

The U.S. Supreme Court has recognized that, under the predecessor to this regulation, an interest must be disclaimed within a reasonable time after obtaining knowledge of the transfer creating the interest to be disclaimed, rather than within a reasonable time after the distribution or vesting of the interest. Jewett v. Comm’r, 455 U.S. 305 (1982). The requirement in the regulations that the disclaimer must be made within a “reasonable time” is a matter of federal, rather than local law. Id. at 316. Whether a period of time is reasonable under the regulations is dependent on the facts and circumstances presented.

In this case, Taxpayer will execute each disclaimer within nine months of learning of the transfers creating his interests in each of Trust 1, Trust 2, Trust 3, and Trust 4. Accordingly, based upon the information submitted and the representations made, we conclude that Taxpayer’s proposed disclaimers of his interests in Trusts, if made on or before Date 3, will be made within a reasonable time after Taxpayer learned of the existence of the transfers under § 25.2511-1(c)(2). Furthermore, provided that Taxpayer’s disclaimers are valid under State law and assuming the other requirements of § 25.2511-1(c)(2) are met, Taxpayer’s disclaimer of his interests in Trusts will not be taxable gifts under § 2501.

Turney P. Berry
Louisville, Kentucky