Recent Wealth Transfer Developments – Prof. Pennell’s Views

Last week I attended a continuing legal education conference and one of the topics covered by Prof. Jeffrey N. Pennell of Emory University School of Law was “Recent Wealth Transfer Developments.”  If you’re not familiar with Prof. Pennell, suffice it to say that within the estate planning world, when Prof. Pennell speaks, people really listen.  Below is a summary of Prof. Pennell’s comments that stood out to me.

  • Hot topics in wealth transfer have shifted in recent years.  While valuation questions remain prevalent, not much else is going on.  (According to Prof. Pennell, apparently we’ve paid Congress to stay home and that’s exactly what they’ve done.)  However, interest in income tax planning, transferee liability, and state court developments is on the rise.  He cautioned that practitioners need to be aware of changes that are happening in other states since many clients own property in multiple states.
  • Prof. Pennell commented on the “Greenbook Proposals” that are issued each year in conjunction with the president’s budget.  Prof. Pennell thinks that the proposed changes to grantor retained annuity trusts will eventually be implemented.  He pointed out that the “sleeper aspect” of the proposed changes is that zero-gift GRATs will go away which will make the remainder a future interest subject to gift tax.
  • With regard to the Greenbook proposal on intentionally defective grantor trusts, Prof. Pennell doesn’t believe this will go forward.  However, he said that the proposal shows that “Treasury is angry” and really “hates” transactions which rely on its own mortality tables for a private annuity or self cancelling installment note, and really “hates” the kind of transactions in which an appreciating asset is transferred into an IDGT in exchange for a private annuity or SCIN.
  • Prof. Pennell has been surprised by how quickly state courts have reacted to the U.S. Supreme Court’s decision in the Windsor case.  He predicts that eventually no state will hold discrimination based on same sex marriage constitutional.
  • Also at the state level, courts have been successfully challenging surviving spouses who reject wealth in order to remain on Medicaid.  In addition, financial elder abuse through Powers of Attorney is on the rise and some states have passed laws that disinherit a person who uses a Power of Attorney to commit financial elder abuse.
  • Finally, Prof. Pennell said that with regard to asset protection, there hasn’t been a single case yet which says it works.
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