Family Law Archives - Page 4 of 8 - The National Law Forum

Death and Taxes: House Bill Eliminates “Death” Tax in 2024

On November 2, 2017, the U.S. House of Representatives’ Ways and Means Committee released its proposal for tax reform via the Tax Cuts and Jobs Act. The House’s draft legislation contains a number of provisions that, if enacted, would significantly change the wealth transfer landscape, including the total repeal of the estate and generation-skipping transfer taxes as of January 1, 2024.

Under the proposal, commencing on January 1, 2018, the individual lifetime gift and estate tax exemption amount will be doubled to $10 million ($20 million for married couples), indexed for inflation—$11.2 million per person in 2018 ($22.4 million for married couples). This increase in the exemption amount also applies to the generation-skipping transfer tax.

The draft legislation calls for a total repeal of the estate and generation-skipping transfer taxes as of January 1, 2024, while preserving the ability of beneficiaries to obtain a basis adjustment as to inherited property. Although the gift tax is set to remain in place, a reduction in the rate from 40% to 35% is provided for. Similarly, the annual exclusion—scheduled to increase to $15,000 per individual in 2018 ($30,000 for married couples who elect to split their gifts)—looks certain to survive.

For more Family, Estates & Trusts legal analysis, go to The National Law Review

The Best Housewarming Gift for the Unmarried Couple: An Estate Plan

“Thinking too long about doing something is often the reason it never gets done.”
–Everyday Life Lessons

In recent years, a growing number of Americans are deciding to cohabitate instead of getting married or remarried. Often, individuals of all ages, state they do not need an estate plan, either because they are not married or because they do not have children. These are not reasons to avoid preparing your estate plan and, in fact, are often more reason to ensure your estate is in order. Although this article will not discuss everything that unmarried cohabitating couples should have in place, it is a decent starting point for a conversation with your partner and, eventually, an estate planning attorney.

Estate plans are important for a devoted unmarried couple, because without an estate plan, you have no input into major healthcare and financial decisions for your partner.

Medical Decisions

You have been together for years or even decades, but if you are hospitalized, can your partner speak on your behalf and make decisions for your care and well-being? Sadly, no. Failure to have a valid Health Care Power of Attorney in place may result in a courtroom battle between your partner and family. A Health Care Power of Attorney is a document whereby you name an Agent to act on your behalf if you are unable to make reasonably informed medical decisions for yourself. Undertake an honest discussion with your partner concerning your wishes. Topics to discuss include organ transplant during life, removal of life sustaining treatment, burial arrangements, organ donation and religious limitations. Your wishes will be explicitly stated within the Health Care Power of Attorney, which your named Agent must follow to the best of their abilities.

Real Property and Holding Title

Throughout your relationship, you may have purchased a home (or several homes, depending on your lifestyle). Consider this scenario: you both paid half of the down payment for the home, and you each pay half of the monthly mortgage payments, but because your partner had a better credit score, the home is only titled in his or her name. If your partner dies without a Last Will and Testament that leaves the property to you, that property is not yours, and unless you purchase it for fair market value, you will have to vacate the home. If your partner did have a valid Last Will and Testament, it could provide that the home be distributed directly to you. Other options include your partner recording a Beneficiary Deed, which states that when he or she dies, the property passes to you by operation of law; another option is that your partner could deed the property to be held in both your names, as joint tenants with right of survivorship. Be aware that such a transfer may have gift tax implications and may affect your mortgage. Discuss these matters with your attorney before proceeding.

Distribution of Your Assets

By living together, you have likely acquired mutual possessions and one of you may have supported the other for a period of time, e.g. during graduate school, through loss of employment or through a disability. Because of this, there may be assets that you both believe are shared, even if they are in the sole name of one partner.

If you do not have a valid Last Will and Testament, your estate is considered intestate. An estate that passes through intestate succession means your assets will be distributed according to Arizona law. In this scenario, the following persons will receive your assets: first your legal spouse, then your children, siblings, parents, grandparents and finally, if none of the foregoing are then living, to issue of your grandparents. If you want to leave anything to your partner, you must execute a Will that provides for the distribution of your estate to him or her. There are also other options you can discuss with your attorney, such as beneficiary designations and language that provides for transfer on death of the assets.

You may also want to consider leaving your partner as your beneficiary on a life insurance policy or on any retirement accounts. At the very least, be aware of who is named as your beneficiary on your policies and accounts and be sure those are your wishes.

Although seeking the advice of an attorney is important, start the conversation at home, informally.

How to Start

Have a casual conversation with your partner to discuss the basics. These topics will likely require multiple conversations. If you are not sure how to start, go straight to the source. Many attorneys charge a one-time flat fee for an initial consultation. You will want to find an attorney with whom you are both comfortable and, preferably, that you will use in the preparation of your documents. When you are satisfied with your decisions, engage the attorney and get drafts started. Review the drafts with your attorney in his or her office and then take the drafts home to read and digest alone. Take your time. Be sure to ask any questions and voice any concerns; this is why you are paying the attorney. Throughout the process, it is important to remember that most estate planning documents can be revised if your circumstances or living arrangements change.

If it is important to you, discuss your plan with your family so they do not feel left out of important decisions.

Acceptance by Family and Friends

There is a chance some of your family or friends may not agree with your lifestyle or the decision to live together. Attempt to inform your friends and family that your desire is for your partner to be the lead in making decisions on your behalf, and that the two of you have discussed it and made each other aware of your personal wishes. Doing so may also avoid potentially costly and time-consuming legal battles should you become incapacitated or die.

Take the first step and work your way through it. Although it may seem overwhelming initially, the process should only take a couple of months. Once finished, you will both be able to sigh with relief knowing these issues have been resolved.

This post was written by Amber Hughes Curto and Amy K. Povinelli of Ryley Carlock & Applewhite, A Professional Corporation.

Unanimous Supreme Court Decision in Favor of “Church Plan” Defendants

Today, the Supreme Court handed a long-awaited victory to religiously affiliated organizations operating pension plans under ERISA’s “church plan” exemption. In a surprising 8-0 ruling, the Court agreed with the Defendants that the exemption applies to pension plans maintained by church affiliated organizations such as healthcare facilities, even if the plans were not established by a church. Justice Kagan authored the opinion, with a concurrence by Justice Sotomayor. Justice Gorsuch, who was appointed after oral argument, did not participate in the decision. The opinion reverses decisions in favor of Plaintiffs from three Appellate Circuits – the Third, Seventh, and Ninth.

For those of you not familiar with the issue, ERISA originally defined a “church plan” as “a plan established and maintained . . . for its employees . . . by a church.” Then, in 1980, Congress amended the exemption by adding the provision at the heart of the three consolidated cases. The new section provides: “[a] plan established and maintained . . . by a church . . . includes a plan maintained by [a principal-purpose] organization.” The parties agreed that under those provisions, a “church plan” need not be maintained by a church, but they differed as to whether a plan must still have been established by a church to qualify for the church-plan exemption.

The Defendants, Advocate Health Care Network, St. Peter’s Healthcare System, and Dignity Health, asserted that their pension plans are “church plans” exempt from ERISA’s strict reporting, disclosure, and funding obligations. Although each of the plans at issue was established by the hospitals and not a church, each one of the hospitals had received confirmation from the IRS over the years that their plans were, in fact, exempt from ERISA, under the church plan exemption because of the entities’ religious affiliation.

The Plaintiffs, participants in the pension plans, argued that the church plan exemption was not intended to exempt pension plans of large healthcare systems where the plans were not established by a church.

Justice Kagan’s analysis began by acknowledging that the term “church plan” initially meant only “a plan established and maintained . . . by a church.” But the 1980 amendment, she found, expanded the original definition to “include” another type of plan—“a plan maintained by [a principal-purpose] organization.’” She concluded that the use of the word “include” was not literal, “but tells readers that a different type of plan should receive the same treatment (i.e., an exemption) as the type described in the old definition.”

Thus, according to Justice Kagan, because Congress included within the category of plans “established and maintained by a church” plans “maintained by” principal-purpose organizations, those plans—and all those plans—are exempt from ERISA’s requirements. Although the DOL, PBGC, and IRS had all filed a brief supporting the Defendants’ position, Justice Kagan mentioned only briefly the agencies long-standing interpretation of the exemption, and did not engage in any “Chevron-Deference” analysis. Some observers may find this surprising, because comments during oral argument suggested that some of the Justices harbored concerns regarding the hundreds of similar plans that had relied on administrative interpretations for thirty years.

In analyzing the legislative history, Justice Kagan aptly observed, that “[t]he legislative materials in these cases consist almost wholly of excerpts from committee hearings and scattered floor statements by individual lawmakers—the sort of stuff we have called `among the least illuminating forms of legislative history.’” Nonetheless, after reviewing the history, and as she forecasted by her questioning at oral argument (see our March 29, 2017 Blog, Supreme Court Hears “Church Plan” Erisa Class Action Cases), Justice Kagan rejected Plaintiffs’ argument that the legislative history demonstrated an intent to keep the “establishment” requirement. To do so “would have prevented some plans run by pension boards—the very entities the employees say Congress most wanted to benefit—from qualifying as `church plans’…. No argument the employees have offered here supports that goal-defying (much less that text-defying) statutory construction.”

In sum, Justice Kagan held that “[u]nder the best reading of the statute, a plan maintained by a principal-purpose organization therefore qualifies as a `church plan,’ regardless of who established it.”

Justice Sotomayor filed a concurrence joining the Court’s opinion because she was “persuaded that it correctly interprets the relevant statutory text.” Although she agreed with the Court’s reading of the exemption, she was “troubled by the outcome of these cases.” Her concern was based on the notion that “Church-affiliated organizations operate for-profit subsidiaries, employee thousands of people, earn billions of dollars in revenue, and compete with companies that have to comply with ERISA.” This concern appears to be based on the view that some church-affiliated organizations effectively operate as secular, for-profit businesses.

Takeaways:

Although this decision is positive news for church plans, it may not be the end of the church plan litigation. Numerous, large settlements have occurred before and since the Supreme Court took up the consolidated cases, and we expect some will still settle, albeit likely for lower numbers.
In addition, Plaintiffs could still push forward with the cases on the grounds that the entities maintaining the church plans are not “principal-purpose organizations” controlled by “a church.”

René E. Thorne and Charles F. Seemann III of Jackson Lewis P.C..

The Fundamentals of Guardianship: What Every Guardian Should Know [BOOK]

Serving as guardian is never simple or easy. Having the responsibility to make major life decisions for another is much more difficult than making decisions for oneself. Recent studies by the National Center for State Courts estimate that between one to two million adults are under court-supervised guardianship. The Administrative Conference of the United States estimates that approximately 75 percent of guardians are family members or friends. A constant refrain in multiple national studies and legislative reports is that once guardians are appointed they receive little instruction on how to carry out their responsibilities and have few resources to guide them.

Fundamentals of Guardianship is the much-needed, basic manual for new guardians that explains those roles and responsibilities. The court orders guardians to make decisions; Fundamentals of Guardianship explains how to make those decisions. It guides the new guardian step-by-step through the process of how to make responsible and ethical decisions, prudently manage another’s resources, avoid conflicts of interest, and involve the person under guardianship in the decision process. Fundamentals of Guardianship is the authoritative resource written by guardians with decades of experience and members of the National Guardianship Association.

Click here to order The Fundamentals of Guardianship: What Every Guardian Should Know

This book will appeal to all who have been appointed as guardian or conservator, whether lawyer, family member, friend, volunteer, or public or private entity, as well as all those who serve vulnerable adults. Included on this list are judges, court administrators, law enforcement officials, adult protective services, social workers, health care providers, case managers, residential care administrators, long-term care ombudsmen, financial institutions, and financial advisors.

The Fundamentals of Guardianship: What Every Guardian Should Know [BOOK]

Click here to order The Fundamentals of Guardianship: What Every Guardian Should Know

Same Sex Marriage Defined by IRS

Just before Labor Day weekend, the U.S. Department of Treasury and the Internal Revenue Service (IRS) released final regulations amending the definitions of “marriage” and “husband and wife” in the wake of the Supreme Court’s Obergefell v. Hodges decision, which legalized same-sex marriage, and the Windsor v. U.S. decision, which struck down Section 3 of the Defense of Marriage Act (DOMA). The proposed regulations, issued in October 2015, were followed by several comments and a request for a public hearing (at which the requestor did not attend, and at which no one else asked to speak). The comments prompted minor refinements to the proposed rules, with the final regulations providing the following:

For federal tax purposes, the terms “spouse,” “husband,” and “wife” are defined as an individual lawfully married to another individual. These terms do not include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship if that relationship is not denominated as marriage under applicable law in the jurisdiction in which the relationship was entered into (regardless of where the couple lives (i.e., domicile)).
“Husband and wife” is defined as two individuals lawfully married to each other.

The definitions set forth above apply regardless of the taxpayers’ sexes or genders.

Building off of Revenue Ruling 2013-17, which adopted the “place of celebration” rule over the “place of domicile” rule for purposes of determining the validity of a same-sex marriage, the final regulations further provide:

A marriage between two individuals entered into in, and recognized by, any state, possession, or territory of the United States will be treated as a marriage for federal tax purposes (regardless of the married couple’s place of domicile). This standard applies regardless of the term used in the Internal Revenue Code.
Foreign marriages are discussed separately from domestic marriages to ensure clarity on how these foreign marriages are to be treated. Under the foreign marriage rule, two individuals entering into a relationship denominated as marriage under the laws of a foreign jurisdiction are married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States. Under this construction, it is sufficient for a couple who is married outside the United States to be treated as married for federal tax purposes in the United States if a single jurisdiction would recognize them as married; thus, a review of all pertinent laws of a state or territory within the United States will not be required.

Notably, the IRS declined to adopt certain suggestions submitted by commentators, including:

That the regulations specifically reference “same-sex marriage” such that they would be gender-neutral and to avoid any potential issues of interpretation. The IRS reasoned that the regulations were clear and did not present any potential for confusion; further, adopting this comment was deemed to potentially undermine the goal of eliminating distinctions in federal tax law based on gender.
That the regulations clarify that common-law marriages of same-sex couples will be recognized for federal tax purposes. While the statutes of certain states recognizing common law marriages only do so for opposite-sex couples, the Treasury and IRS opined that the Supreme Court’s holdings, coupled with prior IRS guidance, make clear that common law marriages are valid, lawful marriages for federal tax purposes. While the agencies did acknowledge that some states had laws “on the books” prohibiting same-sex marriage (including some states that allow common law marriage), since the government was “unaware” of any state enforcing those statutes or otherwise prohibiting same-sex couples from entering into common law marriages, the Treasury and IRS declined to make any further clarifications on this issue.

While employers who sponsor benefit plans should have already modified their plans and procedures to come into compliance with Obergefell, Windsor, and Revenue Ruling 2013-17, the finalization of these regulations brings refinements to the rules that should be captured by those working with benefit plans. For example, how are foreign marriages treated for imputation of income in a group health plan setting? In addition, how are same-sex common law marriages reviewed under the qualified plan joint and survivor rules? A careful review of the final regulations’ definitions as compared to current plan documents and administrative practices is recommended.

Written by Carrie E. Brynes and Jorge M. Leon of Michael Best & Friedrich LLP.

The Supreme Court Rules in Favor of Same-Sex Marriage: Employer Next Steps

What should employers be thinking about in the benefits arena now that the US Supreme Court has ruled in Obergefell v. Hodges that all states must issue marriage licenses to same-sex couples and fully recognize same-sex marriages lawfully performed out of state?

We suggest that employers consider whether the following plan design changes, health plan amendments, and/or administrative modifications are necessary:

Review employee benefit plans’ definition of “spouse” and consider whether the Court’s decision will affect the application of the definition (e.g., if the plan refers to “spouse” by reference to state laws affected or superseded by the Obergefell decision). Qualified pension and 401(k) plans generally conformed their definitions of spouse to include same-sex spouses post-Windsor to comply with Internal Revenue Code provisions that protect spousal rights in such plans, but health and welfare plans may not have been so conformed.
Communicate any changes in the definition of spouse or eligibility for benefits to employees and beneficiaries, as applicable.
Update plan administration and tax reporting to ensure that employees are not treated as receiving imputed income under state tax law for any same-sex spouses who are covered by their employer-sponsored health and welfare plans (to the extent that coverage for opposite-sex spouses would otherwise be excluded from income).
If an employer currently covers unmarried domestic partners under its benefit plans, it may want to consider whether to eliminate coverage for such domestic partners on a prospective basis (and therefore only allow legally recognized spouses to have coverage). Employers that make that type of change also will need to determine the timing and communication of such a change.
Employers with benefit plans that treat same-sex spouses differently than opposite-sex spouses should consider whether to maintain that distinction. Even though nothing in Obergefell expressly compels employers to provide the same benefits to same-sex and opposite-sex spouses, and self-insured Employee Retirement Income Security Act (ERISA) health and welfare plans are not subject to state and municipal sexual orientation discrimination prohibitions, we believe these types of plan designs are likely to be challenged.

ARTICLE BY Andy R. Anderson & Lindsay M. Goodman of Morgan, Lewis & Bockius LLP

Same-Sex Marriage Equality: What Employers Need to Know After Obergefell

U.S. Supreme Court Finds a Constitutional Right to Same-Sex Marriage: Implications for Employee Benefit Plan Sponsors

On June 26, 2015, the U.S. Supreme Court issued a historic decision in Obergefell v. Hodges, holding that the Fourteenth Amendment’s Due Process and Equal Protection Clauses require states to allow same-sex marriage and to recognize same-sex marriages performed in other states. The decision comes exactly two years to the day from the Court’s decision in Windsor defining “spouse” to include same-sex spouses for purposes of federal law.

As a result of the Court’s decision, the existing 14 state bans on same-sex marriage are invalid, and same-sex spouses are entitled to all of the rights extended to opposite-sex spouses under both federal and state law.

From an employee benefits perspective, it appears thatObergefell may most significantly impact sponsors ofinsured health and welfare plans in states that currently ban same-sex marriage. Employers and other plan sponsors in those states will be required to offer insured benefits to same-sex spouses because state insurance law will require that the term “spouse” be interpreted to include them. Based on government guidance issued following the Windsor decision, it seems unlikely that the decision would have retroactive effect, though such claims are possible.

For sponsors of self-insured benefit plans, a question may exist as to whether Obergefell directly impacts a sponsor’s decision not to provide health coverage to same-sex spouses (because state law does not apply to such plans). However, it would appear that there would be heightened risks under federal and state discrimination laws for plans that define “spouse” in a manner that is inconsistent with the federal and state definitions, particularly since the Court held that marriage is a fundamental right under the Constitution, and an ERISA preemption defense likely would be weaker in this new climate.

It is also noteworthy that, as a result of the Court’s decision, there will no longer be imputed income for state tax purposes with respect to employer-provided health coverage for same-sex spouses, allowing for consistent administration in all states in which an employer operates. Since Windsor, there have not been federal tax consequences with respect to these benefits, but some states continued to impute income for state tax purposes.

Finally, with respect to federally-regulated benefits such as qualified retirement plans and Code Section 125 benefits (for example, flexible spending accounts), the Court’s decision does not necessarily warrant any change, since those plans have been required, since Windsor, to recognize same-sex spouses. Of course, plan language should be reviewed for consistency with the decision, and employers in some states may find that there are new spouses seeking benefits under those plans. There also will be some administrative and enrollment issues, similar to when Windsor was decided.

Employers, particularly those operating in states that currently ban same-sex marriage, should review their benefit plans and policies and consider whether any changes need to be made in light of Obergefell. Some employers may also reconsider their domestic partner benefits programs now that same-sex couples have the right to marry and have their marriage recognized across the entire country.

We expect that there will be guidance from the U.S. Department of Labor and the Internal Revenue Service regarding the employee benefit plan issues that emanate from Obergefell, so stay tuned.

ARTICLE BY Roberta K Chevlowe of Proskauer Rose LLP

Same-Sex Divorces in New Jersey

On September 27, 2013, in a landmark case for the state, Garden State Equality v. Dow, New Jersey Superior Court Judge Mary Jacobsonruled that the state must allow same-sex couples to marry. While Governor Chris Christie immediately stated that his administration would be appealing the ruling, he eventually withdrew his appeal, and the first same-sex marriages in the state were performed just after midnight on October 21, 2013. Prior to this date, same-sex couples were only allowed to enter into civil unions in the state, which were not recognized by the federal government.

Same-sex couples in New Jersey now have the same rights as opposite-sex couples. These rights are most frequently recognized during the divorce process; namely with regards to the equitable distribution of assets acquired during the marriage and alimony that may be paid to the dependent spouse. Both of these concepts are dealt with by the court and determined through application of a variety of factors. One of the most important factors at issue with same-sex divorces is the length of the marriage. Obviously, same-sex marriages are likely to be shorter in duration than heterosexual marriages simply because same-sex couples were not legally allowed to marry until almost two years ago, and were only permitted to enter into civil unions since 2007 when The Civil Union Act was signed into law by then-Governor Jon Corzine.

However, because same-sex marriage is a relatively new concept in New Jersey, there have been significantly fewer same-sex divorces in the state and, therefore, case law addressing the award of alimony and equitable distribution in same-sex divorces are in infancy and not yet developed.

N.J.S.A. 2A:34-23(b) provides for different forms of alimony and requires the court to consider a variety of factors, one of which is the duration of the marriage, in awarding alimony to one party. However, this is the exact scenario in which same-sex couples are more disadvantaged then heterosexual couples because they only received the right to marry.

Consider a hypothetical situation in which a couple is divorcing in 2015. They have been together as if they were a married couple since 2008, but were only officially married in 2014. How should the court address the “length” of the couple’s marriage? In reality, they have only been married for a year, but the relationship itself has lasted much longer. If the court took the “length of marriage” factor literally, construing it from the day of actual marriage (one year ago), the dependent spouse could be awarded a comparatively minimal amount of alimony, considering the relationship has existed longer than just one year. The dependent spouse could potentially argue that they should be awarded a greater alimony award because the court should consider the fact that they were not legally allowed to get married and this is why the marriage is technically so short. Again, same-sex marriage and thus, same-sex divorce, is in its infancy in the Garden State, so it is impossible to know precisely how a court will rule in a scenario like this.

Another issue is cohabitation. Same-sex couples in New Jersey have had no other option but to live together without legal recognition. While there have not been cases that have addressed pre-marital cohabitation in regards to same-sex couples, this issue has been addressed for the purposes of alimony as it relates to heterosexual couples. In McGee v. McGee, the New Jersey Superior Court, Appellate Division held that the “extent of actual economic dependency, not one’s status as a spouse, must determine the duration of support.” Therefore, because pre-marital cohabitation may be considered for the purposes of alimony in an opposite-sex divorce, it is likely that such cohabitation, especially for individuals who could not get married, will be a factor in same-sex divorces.

The argument regarding the “length” of a same-sex marriage in New Jersey is further complicated by the fact that civil unions have existed in New Jersey since 2007. In Lewis v. Harris, the New Jersey Supreme Court held that the State must provide the same rights and benefits of marriage to committed same-sex couples that were given to opposite-sex couples. The reason why this complicates the equitable distribution of assets and the award of alimony in same-sex marriages is because it weakens the dependent spouse’s argument that the marriage would have been longer had New Jersey permitted same-sex marriage to be performed. The supporting spouse could argue that marriage-like status (civil union) was available to the couple and they did not take advantage of the civil union because they did not have a desire to and, therefore, the “length of marriage” should be calculated from the date of the actual marriage, rather than the beginning of the relationship.

Just like the calculation of alimony, the equitable distribution of assets attained while in a same-sex relationship is also analyzed considering a factor of “length of marriage.”

Overall, alimony and equitable distribution in same-sex marriages is new territory in New Jersey. Because there is no case law on point explaining whether same-sex marriages will be calculated based on the length of the relationship, or the definite day of marriage, careful review of the specific facts of each case will be necessary to accomplish and fair and reasonable outcome for the divorcing parties. That is why it is recommended that you speak with an attorney to discuss the specifics of your case.

ARTICLE BY Megan E. Smith of Stark & Stark

Category: Family Law

Death and Taxes: House Bill Eliminates “Death” Tax in 2024

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The Best Housewarming Gift for the Unmarried Couple: An Estate Plan