Articles Posted in Estate Planning

Theresa Harrington of the Contra Costa Times has written about groups that encourage estate plans for pets. These are often referred to as Pet Trusts or may be included in a will with language that creates a testamentary Pet Trust.

She has found that it is suggested that $10,000 – $15,000 a year be set aside for the care of one’s pet.

“Most people think some relative will take them. Sometimes they do, and sometimes they don’t. She quotes, “From working in animal rescue, I see what happens to animals when their owners die. Approximately 500,000 pets are euthanized nationwide every year because they have gone into shelters when their owners passed away and homes couldn’t be found for them.

For a number of years the IRS has attacked FLPs and FLLCs on the basis that there is no valid business purpose for the entity.

Clients have argued that a key reason for using the LP form is so that capital can be concentrated or pooled and then invested for greater resulting returns. Credible evidence is cited to support the contention that money invested with a long term investment time-line and with a disciplined investment policy will yield greater returns than money invested in response to demands for quarterly or annual performance.

Many reported cases have problems because senior family members contribute assets to their LPs while keeping their current invested strategy. It is important for clients to know that the courts have repeatedly cited this lack of change in investment strategy as evidence that the creation of the LP was “only a change of title” or resulted in a “mere recycling of value.”

In 1984 the Supreme Court in Dickman v. Commissioner, defined a taxable gift by using an analogy. The Court used the income tax definition of “all income from whatever source derived” to describe how a taxable gift should be defined.
Section 2501(a)(1) of the Internal Revenue Code imposes a tax upon “the transfer of property by gift.” Section 2511(a) provides that such tax shall apply whether “the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible.” In Dickman, the Court decided that an interest free loan was a gift.
Would a family vacation, or providing a party for a wedding be viewed as a taxable gift? This may depend on whether the person paying for the activity is in attendance of the event.