Heckerling 2015 Recap

ACTEC has posted daily Reports containing highlights of the proceedings of the 49th Annual Philip E. Heckerling Institute on Estate Planning that was held on January 12-16, 2015 at the Orlando World Center Marriott Resort and Convention Center in Florida.

Below please find a link to each of ACTEC’s posts:


Fundamentals Program on Basis and 2014 Recent Developments

UFADAA, Crafting a 21st Century Estate and Gift Tax, Question and Answer Panel, Fundamentals of Income Taxation of Estates and Trusts

Trust Design and IRS litigation issues

Portability, Planning for the 2%, and SCINs and Private Annuities

Portability, SCINs and Annuities, Fiduciary Cases, and Asset Protection

Curing Estate Plans that no Longer make Sense in Light of ATRA 2012, Family Rivalries in Family Owned Businesses, and Tax Administration and Procedural Rules

Tax & Procedural Rules, Philanthropic Imperative, Tax Reduction Strategies, and Trust Designs

Keep It In The Family, Life Insurance, Digital Assets, and Restricted Charitable Gifts

POAs, Split Interest Trusts, Trust Protectors, and Ethics of Being a Fiduciary

Retirement Benefits, Curing Obsolete Estate Plans, Powers of Attorney, Trust Protectors for SNITs

International Developments, Litigation, Family Governance, and Split Interest Trusts Created by Entities

Ethic, Fiduciaries with Businesses, Florida Law, and Guardianships

The New Normal, Planning for Life After Death, and Our Return to What Really Matters

Vendors of interest that were present in the Exhibition and Summary of Tech Tidbits

Materials from December Brown Bag Lunch

Please follow the link below to obtain the materials from the December Brown Bag lunch on “Planning for Beneficiaries with Special Needs.”  At this program attendees learned about special needs trusts, and the estate planning involved for these beneficiaries.  Topics presented on by Rebecca Benson, of Margolis & Bloom included maximizing quality of life and preserving eligibility for public benefit programs.

Special Needs Trusts materials

Materials from November Brown Bag Lunch

Please follow the link below to obtain the materials from the November Brown Bag lunch on “Planning from Abroad:  Inbound Planning Strategies.”  At this program Brian William Monnich of Choate, Hall & Stuart LLP  provided practical strategies for advising non-US persons who plan to become residents and/or domiciled in the US for tax purposes, or wish to transfer wealth to US family members.  Attendees learned how to determine how and when a person becomes resident in the US, various pre-immigration planning techniques, and strategies for estate planning across borders.

Planning From Abroad materials




By:  Kerry Reilly, Esq.

Estate of James A. Elkins, Jr. v. Commissioner

13-60472 (5th Cir.)

Filed: September 15, 2014


James A. Elkins, Jr. (“Decedent”), a Texas resident, owned a fractional share of 64 pieces of modern art at the time of his death.  Decedent owned 50% of the interest in two pieces of art and 73.055% interest in the other 62 pieces.  The Decedent’s children (“Petitioners”) held the remaining interests in the artworks and also served as the Executors of his estate.  Two of the art pieces were subject to a “lease agreement” whereby no interest in the works of art could be disposed of without the assent of all co-owners and no co-owner could transfer or assign his/her “rights, duties and obligations” without the prior agreement of all other co-owners.  With respect to the remaining pieces, a “Co-Tenants Agreement” governed each.  That agreement contained similar limitations.

In determining the estate taxes due upon the death of Mr. Elkins, the Petitioners retained Sotheby’s Inc. to determine value of the individual pieces and the Decedent’s pro-rata share of the artworks and Deloitte, LLP to determine the appropriate discount for lack of control and marketability.

Upon the timely filing for the Decedent’s Form 706, the Internal Revenue Service refused to allow any discount for the works of art and assessed a penalty against the Decedent’s estate of $9,068,266.    The Decedent’s estate challenged this penalty.

Tax Court Proceedings:

In the Tax Court proceedings, the Petitioners supplied evidence from three experts in addition to the Sotheby’s and Deloitte reports – a Texas lawyer, who was an expert on the time and cost associated with litigating restraints on alienation, an expert on valuation of fractional interests in property and an expert in the art market.

The Commissioner supplied one (admitted) rebuttal witness who claimed that “no recognized, [or established] market” existed for partial interests in works of art. In refusing to deviate from the “no discount” position the Commissioner supplied no evidence as to what an acceptable discount might be in the event the Tax Court disagreed.

The Tax Court rejected the Commissioner’s position that no discount was applicable under the “willing buyer/seller” test, however it also rejected the valuations provided by the Petitioners and applied its own discount of 10% for each work of art and assessed the related penalty.  The Decedent’s estate appealed.


Is the Decedent’s estate taxable on the undiscounted value of the fair market value of the artworks or the discounted value; and if it is the discounted value which discounted value applies (1) the Tax Court’s 10% or (2) the percentages supplied by the Decedent’s estate?

Discussion and Decision:

The Fifth Circuit affirmed the Tax Court’s ruling with respect to the rejection of the Commissioner’s argument as to the “zero discount” because a “willing buyer and seller” would take into account the various restrictions on the artwork.    The Fifth Circuit strongly disagreed with the Tax Court’s application of its own unsupported discount amount.

In this concisely written opinion, the Court spent a fair amount of time discussing burdens of proof and evidentiary standards.  The Court noted that the “uncontradicted, unimpeached and eminently credible” nature of the Petitioner’s evidence and the complete lack of evidence from the Commissioner should have resulted in a decision for the Decedent’s estate with respect to the value of the discounts.

The Court noted that the “reversible error” was mainly found Tax Court’s analysis of the “willing buyer/seller” test.  The Court took issue with the Tax Court’s extensive focus on the Decedent’s children as the remaining owners, its insufficient attention to the “willing buyer” and the assumption that the “buyer” would immediately flip his/her interest back to the children at a market rate.  The Court noted that the Decedent’s children are “sophisticated, determined and financially independent,” and that they had rejected entirely the thought of ever selling their interests in the artwork, or the artwork itself.    The Court further notes that in the ‘absence of an established market,’ with the subjective characteristics of the other owners and the time and money it would cost a prospective “willing buyer” to overcome the legal restraints on the artwork the “willing buyer” would likely demand further discounting.

The Court (1) affirmed the Tax Court’s rejection of the “no fractional ownership discount” assertion, (2) affirmed the Tax Court’s holding that the Decedent’s estate may apply fractional-ownership discounts, (3) reversed the Tax Court’s holding that 10% was the appropriate discount, (4) held that the appropriate discounts were those supplied by the estate of the Decedent and (5) rendered judgment in favor of the Petitioners for $14,359,508.21 plus statutory interest.


The Court also noted, in a footnote, that the Commissioner’s rebuttal witness actually weakened the Commissioner’s argument in that by stating that “no recognized market” existed for fractional interests in artwork, the discounts applied to the various pieces should have been greater.

The Basics of Purposes Trusts – Materials from October Brown Bag Lunch

Please follow the link below to obtain the materials from the October Brown Bag lunch on “The Basics of Purpose Trusts.”  This program helped attendees understand the concept of a trust without beneficiaries and how they may be used in an estate plan.  Alexander A. Bove, Jr. of Bove & Langa, P.C. was the speaker.


IRS Recognizes State Court Trust Reformation in Federal Gift and Estate Tax Matter

Author:  Matthew Conroy, J.D., CFP®, Argent Wealth Management, LLC

Private Letter Ruling 2014-36036 – IRS Recognizes State Court Trust Reformation in Federal Gift and Estate Tax Matter

 In PLR 2014-36036, the IRS was asked to rule on the impact of federal estate and gift taxation on a state judicially-reformed irrevocable trust. Original language in the trust conferred a general power of appointment on a trust beneficiary, which upon reformation was changed to a special power of appointment. The IRS recognized the state’s authority to reform trusts and stated it would apply federal tax law based on the amended provisions of the trust.


Five settlors created and funded an irrevocable trust. The trust beneficiary was given a testamentary power of appointment, with no limitation on the exercise of such appointment in favor of the beneficiary’s estate, beneficiary’s creditors, or creditors of beneficiary’s estate. The settlors subsequently learned that this trust provision was contrary to their original intent.  They petitioned their state’s court to reform the trust, requesting that the beneficiary’s general testamentary power be replaced with a special limited testamentary power.  The state court agreed that a scrivener’s error had occurred and reformed the trust retroactive to the creation date.

As there are material estate and gift tax consequences in the exercise and release of powers of appointment, the settlors requested a PLR to determine the extent of the IRS’ recognition of the reformed trust language.


1.  Will the IRS recognize the reformed trust, and not include assets subject to the reformed testamentary power of appointment in the beneficiary’s estate?

2.  Will the reformation be considered a deemed release of the general power, thereby subjecting the beneficiary to gift taxation on the assets?


Section 2041(a)(2) of the Internal Revenue Code includes in the value of the gross estate any property over which the decedent had a general power of appointment. Section 2514(b) provides that the exercise or release of a general power of appointment is deemed a transfer of property by the individual possessing the power.

In this Private Letter Ruling, the IRS cited U.S. Supreme Court case Commissioner v. Estate of Bosch, 387 U.S. 456 (1967).  This case considered whether a state trial court’s ruling would be conclusively binding on a federal agency in matters of estate taxation. The Court concluded that only those rulings from the highest court of the state would be binding when applied to a federal matter. However, in the absence of such a ruling, the federal authority may give “proper regard” to lower state court rulings. The federal authority would in effect “sit as a state court” when making its decision.


Because the current case was not heard in the highest court of the state, the IRS instead gave “proper regard” to the lower court’s reformation of the trust. The IRS found that the court’s correction of a scrivener’s error was consistent with state law as would be applied by the highest court of the state.

The IRS concluded that the reformed testamentary power of appointment would not be considered a general power of appointment so as to include trust assets in the beneficiary’s estate. Further, the reformation was not considered a deemed exercise or release of the beneficiary’s general power, which would subject the beneficiary to gift tax.


This taxpayer-friendly ruling should give practitioners some peace of mind that state judicial reformations will be respected by the IRS. It should be noted that absent a ruling from a state’s highest court, the IRS keeps open the possibility of making rulings inconsistent with lower courts, even after giving them their proper regard.

Please note that a Private Letter Ruling is only directed to the taxpayer requesting it, and cannot be used or cited as precedent.

Materials from September Brown Bag Lunch

Please follow the link below to obtain the materials from the September Brown Bag lunch on “Trust Administration within the New Paradigm of Estate Planning.”  At this program attendees learned what to consider and think about when drafting and administering trusts in the current income and transfer tax environment.  Brett J. Barthelmeh of Squillace & Associates, PC was the speaker.


Effective Immediately for Informal and Formal Estate Proceedings – Probate & Family Court announces new notice requirements to the Division of Medical Assistance

Below is the content of the recent Press Release from the Probate and Family Court Department on the new notice requirements to the Division of Medical Assistance:

“Probate and Family Court Department Announces New Notice Requirements to the Division of Medical Assistance, Estate Recovery Unit, For Informal and Formal Estate Proceedings

As a result of recent legislative changes to Massachusetts General Laws Chapter 190B, in an informal proceeding to probate an estate (with or without a will), a petitioner is now required to give written notice to the Division of Medical Assistance, Estate Recovery Unit (“DMA”), at least seven (7) days prior to filing an informal petition (MPC 150) by sending a copy of the informal petition and death certificate to DMA by certified mail. See G. L. c. 190B, § 3-306(g), as added by St. 2014, c. 165, s. 174.1   Procedurally, the Probate and Family Court shall continue to rely on the affirmative statement made by the petitioner in the informal petition that notice was provided to DMA.

In addition, in a formal proceeding to probate an estate (with or without a will), a petitioner is now required to give citation notice to DMA by mailing a copy of the citation by certified mail, in accordance with the Order of Notice, together with a copy of the formal petition (MPC 160) and death certificate. See G. L. c. 190B, § 3-403(g), as added by St. 2014, c. 165, s. 175.2   Procedurally, the Probate and Family Court shall require that the petitioner certify on the Return of Service that citation notice was provided to DMA.


The above is effective immediately.

For more information, contact Evelyn J. Patsos, Esq., at (617) 788-6613 or by email at [email protected]

G. L. c. 118E, § 32(a) as currently enacted refers to § 3-306(f) in error. See G. L. c. 118E, § 32(a), as amended by St. 2014, c. 165, s. 149. Legislative change is required to correct this error.

2 G. L. c. 118E, § 32(a) as currently enacted refers to § 3-403(f) in error. See G. L. c. 118E, § 32(a), as amended by St. 2014, c. 165, s. 149. Legislative change is required to correct this error.”


Middlesex and Essex Probate Courts Announce New Procedures for Informal Probate Petitions

Below is a Press Release from Middlesex Probate Court and a Memorandum from the Essex Probate Court on their new procedures relating to Informal Probate Petitions:


Date: July 9, 2014

From: Tara DeCristofaro, Register of the Middlesex Probate and Family Court

Re: New “Walk-In” Procedure for Estate Administration Informal Petitions

Contact: Jack Twomey, Administrative Deputy Assistant Register, 617-768-5995



Tara E. DeCristofaro, Register of the Middlesex Probate and Family Court, has announced that she will be piloting a walk-in session for informal petitions. The walk-in session will be available in the Registry every Tuesday afternoon from 12:00 pm. – 3:00 pm., beginning August 5, 2014. If the program is well received, plans are to expand it to multiple days per week.

“I am hopeful that this new procedure will assist the bar and self-represented litigants by dramatically reducing the wait time to informally appoint a personal representative or probate a will in estate administration cases.” said DeCristofaro.

To take advantage of this program, the informal packet must be complete and include all the necessary documents and filing fees. “You are advised to visit the Probate and Family Court MUPC Hub at www.mass.gov/courts to review the checklist of required documents under the informal procedure and to consult the MUPC Estate Administration Procedural Guide for answers to frequently asked procedural questions. “This program is structured to speed up the wait times for informal petitions. Accordingly, we ask that participants in this walk-in service present a complete packet for allowance. Those with questions should use the public probate counter.” said DeCristofaro.

Upon successful review, consumers will be issued an Informal Order and Letter(s) of Appointment before leaving the Registry. If there are any issues with the informal packet, consumers will be instructed on what is necessary to complete the packet and be asked to return at the next available date, or if necessary, be advised of other procedural options if an informal proceeding is unavailable.

“I have heard what court users have said and have committed resources to create an informal process as envisioned by the statute. This is one in a number of initiatives my office will be making over the next year to improve the court users’ experience.”



TO:  Users of the Essex Probate and Family Court

FROM:  Pamela Casey O’Brien, Register of Probate

DATE:  September 11, 2014

SUBJECT:  Informal Probate Filings

To better serve our customers there will be a Magistrate sitting in the Lawrence Registry of Probate on Wednesdays from 8:00 a.m. to 4:30 p.m. to assist with the procession and allowance of Informal Probate Petitions.

Thank you for your attention to this matter”


Upcoming CLE on October 7th

The Trusts & Estates CLE Committee has partnered with the Family Law CLE Committee to co-sponsor a great program on The Intersection of Estate Planning and Family Law.  Below is the agenda for the program.  The content is very interesting, with current insights on the topics discussed by experienced panelists.  Please consider signing up, and share the information with your colleagues as well.

Boston Bar Association
The Intersection of Estate Planning and Family Law
Tuesday, October 7, 2014
2:00 to 5:00 p.m.

Moderator:         Stacy K. Mullaney, Vice President & Trust Counsel, Fiduciary Trust Company, Boston
Panelists:             Jillian Hirsch, Esq. Co- Chair, Day Pitney LLP
Robert J. O’Regan, Esq., Burns & Levinson LLP
Andrew Rothstein, Esq. Co-Chair, Goulston & Storrs
Mary Schmidt, Esq., Schmidt & Federico

 Introduction    5 Minutes

Section I  40 Minutes
Topic:  The Implication of Divorce on Drafting Considerations and Trust Terms
Speaker:  Jillian Hirsch, Esq.

 Section II  40 Minutes
Topic:  “The Trustee Has Been Subpoenaed: Now What?”
Speaker:  Robert J. O’Regan, Esq.

10 minute break

Section III 40 Minutes
Topic:  Non Judicial Settlement Agreements and Other New Approaches for Dealing with Trusts in Divorce
Speaker:  Andrew Rothstein, Esq.

Section IV  40 Minutes
Topic:  Pre and Postnuptial Agreements – Adequate Disclosure, Drafting Techniques and Current Planning Issues
Speaker:  Mary Schmidt, Esq.

Closing Remarks & Questions     5 Minutes

To RSVP, click here.