Articles Posted in Estate Planning

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Lou Ann Cassell inherited $220,000 from a relative. After consulting with advisors, she used the inherited funds to purchase a single-premium fixed annuity from National Life Insurance Company. Cassell was 65 years old at the time she purchased the annuity. The annuity agreement provided monthly annuity payments of $1,389.14, and guaranteed payments for 10 years regardless of when Cassell died, naming her children as beneficiaries should she die within the guaranteed payment period. Cassell was not authorized to withdraw any funds from the annuity, cancel the annuity, or change the payment terms of the agreement. She was authorized to assign the right to the annuity payments and to change the name of her beneficiaries during the guaranteed period. In May 2010, Cassell filed a Chapter 7 bankruptcy petition in the Bankruptcy Court and included the annuity as an asset. However, she also listed the annuity as exempt property under OCGA 44-13-100 (a) (2) (E). The trustee objected, arguing the annuity payments did not meet two of the requirements necessary to qualify for the statutory exemption, specifically that the annuity was not funded by employment related wages or benefits and the payments due under the annuity were not "on account of age." The bankruptcy court disagreed and entered an order concluding that the two challenged requirements were met. It did not make a ruling with regard to the third requirement, that the payments be reasonably necessary for the support of the debtor or her dependents, because it concluded the parties had provided insufficient evidence pertaining to that issue. The United States District Court affirmed on appeal and remanded to the bankruptcy court for it to rule on the issue not addressed in its original order. Rather than litigate that issue in the bankruptcy court, the trustee conceded the annuity was reasonably necessary for the support of Cassell and appealed to the Eleventh Circuit Court of Appeals. After briefing and oral argument by the parties, the Eleventh Circuit recognized the absence of precedent on the dispositive issues of state law and certified its questions to the Georgia Supreme Court: (1) is a single-premium fixed annuity purchased with inherited funds an "annuity" for purposes of OCGA 44-13-100 (a) (2) (E); and (2) is a debtor's right to receive a payment from an annuity "on account of . . .age" for the purposes of OCGA 44-13-100 (a) (2) (E) if the annuity payments are subject to age-based federal tax treatment, if the annuitant purchased the annuity because of age, or if the annuity payments are calculated based on the age of the annuitant at the time the annuity was purchased. The Supreme Court found that a single-premium fixed annuity purchased with inherited funds may qualify as an exempt annuity under 44-13-100 (a) (2) (E) and that the determination of whether a right to receive payment from an annuity is "on account of" age for purposes of 44-13-100 (a) (2) (E) is not necessarily based on the existence of a single factor but requires consideration of a variety of factors pointing to the existence of a causal connection between the payee's age and the right to payment. View "Silliman v. Cassell" on Justia Law

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In a proceeding under Chapter 7 of the Bankruptcy Code, a question arose concerning the application of the Commonwealth's homestead protection statute, G.L.c. 188, section 1, to a beneficiary of a trust. Finding no controlling precedent in the court's decisions, the Bankruptcy Court judge certified the following question: "May the holder of a beneficial interest in a trust which holds title to real estate and attendant dwelling in which such beneficiary resides acquire an estate of homestead in said land and building under G.L.c. 188, section 1?" The court confined its answer to the 2004 version of the homestead statute and answered the certified question in the negative. The court rejected the debtor's claims and concluded that even though the debtor resided in the Lowell property and used it as her home, as the owner of a fifty percent beneficial interest in the trust that holds to the property but who did not direct or control the trustee, she could not validly claim a homestead exemption for the property under the 2004 act.View "Boyle v. Weiss" on Justia Law

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Marjorie Ward established a trust that devised $100,000 to her stepdaughter, Joan, and provided that the trust residue be distributed in equal shares to Ward's sons, Jack and James. Ward also instructed that before Jack would receive any distributions from the trust, his share would be decreased, and Joan's increased, by any amount he owed Joan. After Ward died, the district court concluded Jack's share would be reduced by $298,356, the amount he owed Joan on the date of Ward's death. The Supreme Court affirmed, holding (1) the district court complied with the requirements of Mont. R. Civ. P. 52(a) by orally stating its findings of fact and conclusions of law; and (2) the district court did not err in ordering that Jack's share of the trust be reduced by the amount he owed his stepsister, pursuant to Ward's instructions contained in the trust, even though that debt was previously discharged in bankruptcy proceedings.View "Ward v. Ward" on Justia Law

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This case stemmed from Reliance Group Holdings, Inc.'s ("RGH") and Reliance Financial Services Corporation's ("RFS") voluntary petitions in Bankruptcy Court seeking Chapter 11 bankruptcy protection and the trust that was established as a result. The trust subsequently filed an amended complaint alleging actuarial fraud and accounting fraud against respondents. At issue was whether the trust qualified for the so-called single-entity exemption that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), 15 U.S.C. 77p(f)(2)(C); 78bb(f)(5)(D), afforded certain entities. The court held that the trust, established under the bankruptcy reorganization plan of RGH as the debtor's successor, was "one person" within the meaning of the single-entity exemption in SLUSA. As a result, SLUSA did not preclude the Supreme Court from adjudicating the state common law fraud claims that the trust had brought against respondents for the benefit of RGH's and RFS's bondholders. Accordingly, the court reversed and reinstated the order of the Supreme Court.View "The RGH Liquidating Trust v. Deloitte & Touche LLP, et al." on Justia Law