THIS ISSUE'S HEADLINES

Victory for PLDO Trust and Estate Attorneys in GroundBreaking Decision

Account Transcripts as Substitutes for Estate Tax Closing Letters

Increased Evidentiary Burden to Establish Valid Nontax Business Purpose for Limited Partnerships

Special Needs Trust Fairness Act Fixes Legislative Drafting Error in the Omnibus Budget Reconciliation Act of 1993


IRA PLANNING TIP: Navigating the Rules of Required Minimum Distributions


VICTORY FOR PLDO TRUST AND ESTATE ATTORNEYS IN GROUNDBREAKING DECISION

Ruling recognizes, for the first time, a cause of action of tortious interference with an expected inheritance in Rhode Island

In a decision on January 4, 2017, the Rhode Island Superior Court recognized, for the first time in State history, the independent tort of Tortious Interference with an Expected Inheritance. The decision, written by Associate Justice Michael A. Silverstein, aligns Rhode Island with approximately half of the United States that have extended the common law claim of tortious interference with a contract to situations in which a tortfeasor wrongfully interferes with expected inheritance, benefit under a will, at-death benefit, or inter vivos gift.

The Court issued the decision in response to a motion to dismiss filed by the Defendant, the Legion of Christ. Americans United for Life, represented by PLDO, sued the Legion of Christ, claiming that Father Marcial Maciel, the founder and head of the Legion, and other Legion officials systematically preyed upon Mrs. Gabrielle Mee, an elderly and wealthy widow, taking advantage of her religiousness to manipulate her and strip her of her fortune, approximately $60,000,000. AUL, who was a beneficiary under a prior, allegedly revoked, will, claimed that the Legion insulated Mrs. Mee from information that, despite maintaining an image as a celibate and saintly priest, Fr. Maciel had fathered children, two of which he molested, sexually abused teenaged seminarians, and abused drugs, even as the scandals were the subject of a Vatican investigation. AUL alleged that Mrs. Mee never learned the truth about Fr. Maciel or the Legion of Christ after naming the Legion the sole beneficiary of her estate. Mrs. Mee, according to AUL, would never have named Legion a beneficiary had she known about Fr. Maciel.

The Legion of Christ moved to dismiss AUL’s Complaint, arguing that Tortious Interference with an Expected Inheritance is not a viable claim in Rhode Island and that, if it is indeed viable, prior to filing such a tort action, plaintiffs are required to pursue remedies in probate court in the form of will contests, or actions to bring assets back into wrongfully depleted estates. PLDO attorneys Bernard A. Jackvony and Rebecca M. Murphy, assisted by other members of the firm, wrote an objection brief and made an oral argument on behalf of AUL.

The Court agreed with AUL’s arguments and held first that tortious interference with expectation of inheritance represents an extension of the principal found in liability for the tort of intentional interference with prospective contract and second that although plaintiffs must first pursue probate court remedies before filing a claim for tortious interference, AUL had pursued such remedies (by filing to reopen Mrs. Mee’s estate previously) and had demonstrated that it had no available alternative than to file the instant suit. Importantly, the Court noted that “unlike a will contest, a claim for tortious interference does not close with the closing of the estate.”

The decision is significant for AUL, as it allows AUL to continue to pursue its claims against the Legion of Christ in the Rhode Island Superior Court. It also breaks new ground in Rhode Island jurisprudence, setting a new precedent that will penalize, and therefore deter, tortious interference with expected inheritances in the future.

For more information, please contact our trust and estate attorneys, Bernard J. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email bjackvony@pldolaw.com, gcarlino@pldolaw.com and rmurphy@pldolaw.com.

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ACCOUNT TRANSCRIPTS AS SUBSITITUTES FOR ESTATE TAX CLOSING LETTERS

Prior to June 1, 2015, the Internal Revenue Service issued an estate tax closing letter for virtually every estate tax return filed. While the estate tax closing letter is not a formal closing agreement in that the IRS may reopen or reexamine the subject tax return to determine whether there is estate tax liability, it traditionally confirmed that an estate tax return has been accepted by the IRS. However, on June 1, 2015, the IRS changed its policy and will now issue an estate tax closing letter only at the request of an estate and for a charge.

Fortunately, however, in recognition that local probate courts, state tax departments and others have come to rely upon estate tax closing letters for confirmation that a return has been completed and the IRS file has been closed, the Treasury Department and IRS have stated that an account transcript issued by the IRS can substitute for an estate tax closing letter. An account transcript is a computer-generated report that provides current account data including the return received date, payment history, refund history, penalties assessed, interest assessed, balance due with accruals and the date on which the examination was closed. An account transcript may be requested by estates and their authorized representatives, and is available at no charge.

For more information, please contact our trust and estate attorneys, Bernard J. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email bjackvony@pldolaw.com, gcarlino@pldolaw.com and rmurphy@pldolaw.com.

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INCREASED EVIDENTIARY BURDEN TO ESTABLISH VALID NONTAX BUSINESS PURPOSE FOR LIMITED PARTNERSHIPS

In September of 2016, the United States Tax Court found the estate of Edward Beyer liable for an additional $24 million in taxes and penalties, as the assets that Mr. Beyer transferred to a limited partnership did not fall within the bona fide sale exception to 2036(a) and were thus includible in his estate at full fair market value. Estate of Edward G. Beyer v. Commissioner, T.C. Memo. 2016-183; No. 10231-11 (Sept. 29, 2016).

In 2003, advancing in age, Mr. Beyer transferred stock into a limited partnership with a living trust serving as limited partner and a management trust serving as general partner. Later, in 2005, Mr. Beyer transferred the limited partnership interest to a new irrevocable trust in exchange for a promissory note. The Estate claimed that Beyer’s nontax business purposes were to keep the stock in a block, transition management of the assets to Beyer’s nephew, and ensure continuity of asset management. The Tax Court held that while these reasons could be legitimate nontax business purposes, they were not in the case because 1) none of the reasons were listed in the partnership agreement; 2) Beyer did not need the limited partnership in order to achieve the business purposes; and 3) the agreement contained no provision that the stock be held in a block, indicating that the Estate’s proffered nontax reasons were pretextual.

The upshot of Estate of Beyer is that the Tax Court will scrutinize proffered nontax business purposes in the context of the partnership agreement and the decedent’s estate plan in determining whether the purposes are pretextual or indeed represent valid business justifications for establishing a limited partnership. In the wake of Estate of Beyer, practitioners should be careful to state the nontax business purpose(s) in the partnership agreement, and structure the partnership in order to effectuate the business purpose(s).

For more information, please contact our trust and estate attorneys, Bernard J. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email bjackvony@pldolaw.com, gcarlino@pldolaw.com and rmurphy@pldolaw.com.

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SPECIAL NEEDS TRUST FAIRNESS ACT FIXES LEGISLATIVE DRAFTING ERROR IN THE OMNIBUS BUDGET RECONCILIATION ACT OF 1993

On December 13, 2016, President Obama signed the Special Needs Trust Fairness Act into law. Special needs trusts allow disabled individuals to supplement the government benefits they are otherwise eligible for by providing resources for items not covered by those programs, while at the same time protecting the individual's eligibility for the underlying benefit. Previously, under the Omnibus Budget Reconciliation Act of 1993 (OBRA), only parents, grandparents, legal guardians, or a court could establish a special needs trust. Disabled individuals were forced to petition a court, thereby incurring legal costs, in order to establish a special needs trust on their own. The Special Needs Trust Fairness Act attempts to solve the legislative drafting error by allowing individuals with capacity to establish their own special needs trusts. The Act remedies more than 23 years of unfair treatment and its passage is due, largely, to the work of the Special Needs Alliance, and National Academy of Elder Law Attorneys.

For more information, please contact our trust and estate attorneys, Bernard J. Jackvony, Gene M. Carlino and Rebecca M. Murphy at 401-824-5100 or email bjackvony@pldolaw.com, gcarlino@pldolaw.com and rmurphy@pldolaw.com.

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Estates, Trusts & Litigation Practice Overview

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