estate & gift

Earlier this year, Congress again failed to repeal the federal estate tax. 

As many practitioners anticipated (including this blogger), Congress went back to the drawing board to produce a bill which modifies, rather than repeals, the existing tax.   

The proposed bill would:

• Reunify the
  estate, gift and generation-skipping transfer (GST) taxes.
• Increase the estate and gift tax exemption to $5 million per person.
• Reduce the estate tax rate for estates up to $25 million to the
  capital gains tax rate, currently capped at 20%.
• Reduce the
  estate tax rate for estates of $25 million or more to two times the capital
  gains rate.
• Allow married couples to carry over any unused
  exemption to the surviving spouse.

Will it pass?  I predict that some version, perhaps with limited changes, will indeed pass Congress.  Most Americans seem to favor estate tax reform but not estate tax repeal.  While there are those in Congress hoping to push their own agendas (Frist and Kyl, for example) by introducing and re-introducing the same stale repeal bill destined to fail, this compromise bill seems to have some legs.

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From the Washington Post, an article that suggested that a repeal would hurt the "small rich"…

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The Senate failed to garner enough votes to repeal the federal estate tax (again).  For more from NPR, click here.

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To make you consider even more tax cuts.

Now that Congress has pushed through a $70 million tax bill, some Congressional officials are hoping to reintroduce discussion about a permanent federal estate tax repeal.  You can read more here.

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In what will surely add another year of fodder to the gossip rags, the US Supreme Court has unanimously ruled that Anna Nicole Smith (a/k/a Vicki Lynn Marshall) will be allowed to present her case again (and likely, again and again) in federal court in an effort to retrieve hundreds of millions of dollars from her late husband’s estate.

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The continuing Glasser saga, has taken yet another twist.

On Friday, March 3, Judge Alexander P. Waugh, Jr. of the Superior Court of New Jersey, Chancery Division (Probate Part, Middlesex County) issued an order asserting jurisdiction over the Glasser guardianship matter, asking a judge in San Antonio to either dismiss the Texas case or transfer it to the Garden State.

Glasser, who suffers from Parkinson’s disease and Alzheimer’s disease, responded to the news by phone:  "That’s wonderful. I don’t want to go back to Texas. I want to go home." Glasser said by phone from her apartment in Boca Raton, Florida.  Until recently, Ms. Glasser had been confined to Texas under the control of her daughter, Suzanne Mathews.  A judge allowed Ms. Glasser to move to her winter apartment in Florida but Ms. Glasser remains under the control of the Texas court and its caretakers. 

The NJ ruling is a dramatic turn of events in favor of Ms. Glasser’s nephew and son, who have been involved in a legal fight for her return.  Bexar County Probate Court Judge Polly Jackson Spencer had previously lead observers to believe that she would consider sending the case back to New Jersey.

If the case returns to New Jersey, it will be far from over.  There are still issues to be decided involving Ms. Glasser’s health care and her finances.

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Oh, it’s almost too easy…  There’s just so much to report about Anna Nicole and the ironies of her appearing at a Supreme Court hearing…  And in front of Justice Thomas?  But I digress (yes, from the start).

As previously reported, Anna Nicole Smith is headed to the United States Supreme Court for a hearing tomorrow in what is one of the more unusual cases to hit the dockets this year.

Despite the cameras and the possibility of folks like Sam Rubin and Ryan Seacrest hanging around to get a statement from the former Playmate of the Year and reality TV participant (I’m sorry, I can’t bring myself to call her a star), the actual case isn’t the sort of material that usually draws ordinary citizens in…  The crux of the case is jurisdiction, hardly exciting stuff.  But if the previous court cases involving Ms. Smith are any taste of what’s to come, a circus (media or otherwise) can’t be far behind, even in a matter focusing on something as mundane as jurisdiction. 

And yes, with this particular case, according to Kent Richland, Ms. Smith’s lawyer, "She is planning to attend."

You may recall that the stems from a dispute over a potential inheritance from Ms. Smith’s deceased husband, Howard Marshall.  Ms. Smith married Mr. Marshall when she was 26 and he was 89.  At the time, Ms. Smith was working at a night club as an exotic dancer (aka stripper).  Mr. Marshall died just over a year later.  Most of his assets had been placed in a trust for his oldest son, Pierce Marshall, who also ran the Marshalls’  multi-million dollar company, and his Will left nothing to Ms. Smith.  Pierce Marshall alleged that the deceased Mr. Marshall had provided for Ms. Smith during his lifetime with gifts totalling more than $6 million.  This is significant because, typically, you cannot disinherit your spouse at death.  However, in most states, gifts made during lifetime can be considered when determining whether a spouse has been "disinherited."

After a series of legal maneuvers, a Texas probate court found in favor of Pierce Marshall, leaving Ms. Smith with no additional funds from the estate.  However, while the trial in Texas was being heard, Ms. Smith filed for bankruptcy in federal court in California, alleging that Pierce Marshall had interfered with her potential inheritance.  In California, a judgment of just under $90 million was awarded to Ms. Smith.

The US Court of Appeals for the 9th Circuit threw out the award, claiming that the federal courts had no right to hear the matter since it had been previously decided in Texas state court.  This makes sense since typically, probate matters are relegated to state courts.  However, federal courts may hear matters which are considered matters of federal jurisdiction, including disputes involving large amounts of money or federal matters.   

The matter has been appealed to the Supreme Court not on the merits of the individual evidence of the case, but on one simple issue:  Are federal courts allowed to rule on matters that have already been decided in a state probate court?  Or put another way, does federal court always trump state court?

The significance of the answer has serious consequences not just for Ms. Smith (oh come on, can’t I call her Anna Nicole now?) but for other potential probate matters between states, such as, for example, the Glasser case.  However, I suspect that those consequences as reported on TV will pale in comparison to what Anna Nicole shows up wearing on tomorrow…  Keep reading!

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Despite his prior assurances to bring the estate tax repeal to a vote before the end of last summer, Senate Majority Leader Bill Frist announced in remarks for the Conservative Political Action Conference that he would both bring a proposal to reduce or repeal the federal estate tax to a vote in May, and schedule a vote in June on a proposed constitutional ban on gay marriage.

“The days of the death tax are numbered,” Frist said yesterday, according to the Philadelphia Inquirer.

We shall see.

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The Lillian Glasser case, as previously blogged about, raises some interesting issues not only about jurisdiction and fiduciary responsibility, but a more personal question as to whether a child has the right to visit and provide input about the care of a parent.

Ms. Glasser’s case is not unusual. It has attracted media attention, no doubt, because it involves millions of dollars. But what about the more pedestrian case… The case where daughter moves mom out of state under the auspices of taking care of her (and quite probably, her money) and then refuses to allow other siblings to visit, or places limitations on the siblings? What if the daughter refuses to allow mom to make or receive phone calls? What if the daughter is the only person who knows about and makes decisions about mom’s health care? And finances?

It’s a tricky situation. In the absence of a formal guardianship, it is not settled whether there is a statutory right (at least in PA) for a child to have “visitation” rights with a parent. And in situations where there is perceived impropriety, the failure to have access to a parent can create additional mistrust. The child who is “out of the loop”, for example, may wonder what the caretaker sibling is hiding.

On a financial level, this is fairly easy to address. If the caretaker sibling is acting under a financial Power of Attorney, the law in Pennsylvania requires that the Agent (in this case, the caretaker sibling) keep adequate records of the Principal’s finances. If there is a perception that the caretaker sibling is inappropriately utilizing the parent’s funds, a child may petition the Court for a formal accounting of the caretaker sibling’s activities while acting as Agent.

Allegations of impropriety involving health care or mental status are more difficult to address. In almost every solution scenario, a petition to the Court for additional information may be in order.

I, like many of you, am watching the Glasser case with baited breath. Again, while the most significant legal aspects involve the notions of jurisdiction and fiduciary responsibility, what is at the heart of the case is the treatment of an elderly parent. And that human aspect is perhaps the most important of all. So, keep watching this space, we’ll report developments as they occur.

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