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Tuesday
Jul082014

Inherited IRAs Not Exempt From Bankruptcy Proceedings

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

Individual Retirement Accounts or IRAs, are retirement funds – at least until you pass the asset on to heirs other than your spouse. Then, according to a recent decision handed down by the Supreme Court, they become fair game for creditors.

The case at issue was Clark v. Rameker. Heidi Heffron-Clark and her husband Brandon Clark declared Chapter 7 Bankruptcy in 2010, and listed a $300K IRA inherited from Heffron-Clark's mother in 2001, as a primary asset exempt from the bankruptcy estate. The bankruptcy trustee, William Rameker, maintained that the funds in the account did not qualify as retirement funds and should be used to pay off about $700K of the Clarks' debts. The Bankruptcy Court agreed with the trustee.

A District Court reversed the decision though, citing that the exemption covered any account in which the funds were originally accumulated for retirement purposes, and a Seventh Circuit Court reversed the District Court's opinion.

Nine Said No: Supreme Court Justices Unanimously Decide Inherited IRAs Not Protected

When the Seventh Circuit sided with the Bankruptcy Court, the Clarks petitioned the Supreme Court.  Justice Sonia J. Sotomayor delivered the opinion that inherited IRAs do not count as retirement funds because:  

1. Bankruptcy code is written to ensure creditors recover losses but also to ensure debtors can meet their essential needs. Inherited IRAs do not fall in the category of an essential need; and

2. Inherited IRAs cannot prevent the heir from blowing the entire balance on luxuries or non-essential needs.

So where does this leave you and your IRA?

Spendthrift Trusts Protect Assets

When considering your assets and who's going to get them when you pass, think about how best to give your heirs the most benefit while minimizing risk of loss. Most of you would rather see your money go to your designated beneficiaries rather than credit card companies or Uncle Sam.

A spendthrift trust will limit your beneficiary's access to the principal – but it also limits his/her creditors' access to the funds. Instead of direct access to all of the money at any given time, you could ensure your heir gets regular payments, or certain goods/services purchased by the Trustee.

Which beneficiaries will most benefit from this type of trust? Consider the heirs that are:

1. Prone to addictions

2. Generally bad with money

3. Prone to fraud

4. Engaged in a business venture with a high potential for failing

5. Overextended with credit

If you need further information regarding managing your IRA, spendthrift trusts or other estate planning matters, contact me directly. 

Kira S. Masteller is a Trusts and Estate Planning Attorney at our firm. Contact her via email: kmasteller@lewitthackman.com, or by phone: 818.907.3244.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Nov272013

“She’s Crafty”: GoldieBlox, Beasties, Copyrights and Codicils

Civil Litigation AttorneyIP Litigation

 

by Nicholas Kanter & Robert A. Hull, Esq.
November 27, 2013

In 1986, New York hip hoppers the Beastie Boys released Licensed to Ill, the first rap LP to top the Billboard album chart, selling over 9 million copies in the U.S. One of the singles from the hit album was Girls. The song, in which the Beastie Boys sing about their affection for girls, is riddled with sexist lyrics, such as:

Girls - to do the dishes

Girls - to clean up my room

Girls - to do the laundry

Girls - and in the bathroom.

Seventeen years later, northern California toy company GoldieBlox Inc. is rewriting feminine roles, by selling toys meant to inspire young girls to construct, engineer and invent. The problem is they also rewrote the Beasties’ song Girls to market their products:

Girls to build the spaceship,

Girls to code the new app,

Girls to grow up knowing

That they can engineer that.

The rewritten song and accompanying video became a YouTube sensation, receiving over 8.5 million hits since being uploaded to YouTube on November 17, 2013.

In a lawsuit filed on November 21, 2013 in the Northern District of California, GoldieBlox claims the Beastie Boys threatened them with copyright infringement.

Rather than wait for the Beastie Boys to sue, GoldieBlox filed their complaint, seeking a declaratory judgment that their parody video does not infringe the rights of the Beastie Boys (and others that hold rights to the song), and constitutes fair use.

 

Fair Use: Is GoldieBlox's Version of Girls Defensible or Not?

 

GoldieBlox claims they created their song and video specifically to “make fun of the Beastie Boys song, and to “further the company’s goal to break down gender stereotypes and to encourage young girls to engage in activities that challenge their intellect, particularly in the fields of science, technology, engineering and math.” 

Based on the underlying purpose of the song and its intended effect, GoldieBlox asserts their song is protected by the Fair Use Doctrine.  

Under the Fair Use Doctrine, certain uses of another's copyright-protected work may not be considered infringement if the protected work is used for purposes of “criticism, comment, news reporting, teaching…scholarship, or research”  ( 17 U.S.C. §107). Whether a particular use qualifies as “fair use” is determined by considering four “fair use” factors, which include:

  1. The purpose and character of use – how transformative is the new material? Does the new material add new information or understanding?

  2. The nature of copyrighted work – what is the value of the work vis-à-vis the core of the copyright’s protective purposes.

  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole – this factor looks at whether the quantity of the original work used is reasonable in relation to the purpose of the copying.

  4. The effect of the use upon the potential market for or value of the copyrighted work – does the new material deprive the copyright owner of income in some way?

While GoldieBlox’s song by itself seemingly qualifies as Fair Use, the crux of the lawsuit (assuming it does not settle) will likely center on whether GoldieBlox’s use of the song to advertise and sell its retail goods causes the song to lose Fair Use protection.

 

A Brass Monkey in the Machine?

 

Complicating the matter further is the fact that one of the members of the Beastie Boys, Adam “MCA” Yauch, died last year leaving a will which provided that in no event may “any music or any artistic property created by me be used for advertising purposes.”  Another fly in the ointment was the fact that apparently, MCA hand wrote these words on his prepared will near language which prohibited MCA’s image or name from being used for advertising purposes.

It is not clear whether the added language was part of the original will or was added later. If added later, such an amendment (typically called “codicils”) must be executed with the same formalities required of the will. Those formalities include executing the codicil in the presence of witnesses, etc.

Thus, if the handwritten language was added by MCA after the execution of the will, but for example without the presence of witnesses, it could be successfully challenged. However, there seems to be no mention in the press of a specific challenge to such language. Therefore, the language was likely present at the execution of his will.

Presuming this language was valid, in order for it to be enforceable in this case, obviously MCA must own an interest in the song (i.e., the interest must be part of his “estate”).

But, if MCA owned an interest but had previously transferred this interest into, for example, a living trust, the trust would be the owner, not MCA’s “estate”). If there was no commercial prohibition language in the trust, then the will language would not apply to prohibit commercial exploitation of the trust’s interest.

Also, this will restriction would apply only to the beneficiaries of Yauch’s estate. Absent an agreement to the contrary, joint owners of a copyrighted work have an equal right to license the copyright, provided that the other joint owners get their shares of the proceeds.

Thus, if there was not such an agreement between MCA and the other Beastie Boys preventing commercial exploitation of this song, the others could independently license the song to GoldieBlox, despite the prohibition by MCA, with MCA’s estate receiving its share of the proceeds. The prohibition by MCA would likely apply to the beneficiaries of his song interest, but would not be enforceable against the other joint owners.

From the published news reports, it appears as though the others do not wish to permit GoldieBlox to use the song in this manner.  So, MCA’s wishes may indeed be carried out.

However, if the will restriction is not enforceable, MCA’s heirs may be able to license the work commercially, despite objections from the other Beastie Boys.

Ultimately, it will come down to whether the GoldieBlox version is considered a “fair use” of the song. If so, MCA could not have prevented this commercial use while he was living and cannot prevent it after his death.

 

Nicholas Kanter is a Business and IP Litigation Attorney at our firm. Contact him via email: nkanter@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Thursday
Feb232012

Charitable Trusts + Low Interest Rates = Tax Savings

Trusts & Estate Planning

 

by Kira S. Masteller
818.907.3244

 

Some people don't like to talk about death and because of that fear, distaste or superstition; they put off planning for the future. But think about it this way: 

When you pass away, your money and assets will go to one of two places. They will either go to (1) People you care about, or (2) Institutions who have already received your money throughout your lifetime – the State and Federal Governments. 

Those are very broad categories, but it's essentially true. When we talk about the people you care about, we mean more than just those individuals who make up your immediate family. 

In estate planning, “what” you care about may include people, such as yourself, your children, your siblings and your friends – but might also include your alma mater, a national animal rights group, your favorite church or the local Elks Lodge, among many, other organizations. 

The CLAT – Smart Moves in Tax Savings

 

One way to make sure you provide for all of the people and charities you care about is through a CLAT, or Charitable Lead Annuity Trust. The benefit of the CLAT is that you can take advantage of some huge tax breaks right now, while interest rates remain low. In fact, the lower the interest rate, the bigger the tax savings through CLAT. 

These charitable trusts will pay your favorite charity or charities a pre-determined amount of money for a pre-determined time frame, leaving whatever funds or assets that are left at the end to revert back to you, your heirs, or even to another trust. 

If using a CLAT to pass along assets to beneficiaries, your heirs wind up with whatever funds or assets you used to fund the CLAT, and the possibility of very little or no gift tax liability at the end of the term.  For example: 

You own stock that yields dividends (income) you do not need.  You put $100,000 of that stock into a 10 year CLAT that gives $5,000 annually to a program that benefits at-risk teens. The income from the stock increases the value of your CLAT, and at the end of the term, your children get the principal stock, plus the profits it generated. The gift tax your children will owe is based on what the IRS projected the charitable trust to be worth when you first set up the CLAT. 

If employing a CLAT for yourself, you will get the original assets back, and an income tax break. 

Charitable Trusts can be a convenient way to make sure both your heirs and your favorite organizations receive gifts during your lifetime, while you gain an ever-important tax break. 

Kira S. Masteller is a Shareholder in our Trusts & Estate Planning Practice Group. If you have questions about tax planning, business succession planning, or shifting your assets, please call her at 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
Jan122012

Funding a Living Trust -- Estate Planning Advice

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

The most common reason for establishing a living trust is to avoid probate and take advantage of estate tax exemptions.

If you don’t have a revocable trust, your heirs could spend months or even years waiting for the California court to approve the administration of your assets, the payment of your debts, and the distribution of whatever is left of your money/property to your family, friends, charitable organizations or other heirs.

Properly executed Trusts avoid probate. Wills do not avoid probate.

A revocable trust simply means that your trust can be changed or even revoked whenever you like during your life; while a living trust means it goes into effect while you are still alive, unlike a Will, which is not effective until your death. A revocable living Trust avoids probate and can avoid a Conservatorship proceeding while you are living in the event you are unable to manage your own affairs.

Depending on the value of your estate and what type of assets you have, you will decide with your estate planning attorney whether or not the use of a revocable living trust is for you.

Upon executing your revocable living trust, you will need to “fund” your trust. Establishing the trust without putting your assets into the trust defeats the purpose of having a trust in the first place.

A Properly Funded Revocable Living Trust

 

Estate planning does not end with the execution of the trust document. You actually have to transfer title of your assets into the name of the trust (i.e., John Doe, Trustee of The John Doe Family Trust). If you leave an asset out of your trust, that asset could wind up going through probate.

So which assets should be used for funding a trust? Here are some important ones:

▪ Bank Accounts
▪ Brokerage Accounts
▪ Business Interests, i.e. professional corporations, partnerships, sole  proprietorships, etc.
▪ Certificates of Deposit
▪ Investments
▪ Life Insurance
▪ Real Property, i.e. home, land, commercial buildings, etc.
▪ Recreational and Other Vehicles, i.e. cars, motor homes, boats, planes, motorcyles, etc.
▪ Time Share Ownerships

*Note: Retirement assets, annuities and life insurance do not get transferred into your trust. You will work with your estate planning attorney to determine how to name the beneficiaries of these assets so that they are in alignment with your estate and tax planning objectives.

Let’s say you have a lot of assets, and are not sure where to begin when funding your trust. The first step is to make a complete list of all of your interests, property, and investments. You can check off items on this list as you start funding.

Next, I always recommend that my clients check their mail. Every time you get a monthly statement from your bank or brokerage company, make sure the name on your statement is listed with your name as Trustee of your Trust Name. If it isn’t, call that institution to get that particular asset transferred to your living trust, rather than leaving it in your individual name.

Your estate planning attorney will change the title to your real property by recording a Deed with the County. Your real property in other states should also be titled in the name of your trust so that these assets will not go through probate. You will save your heirs a lot of time, money and headaches by properly funding your trust, not to mention utilize all of the estate tax planning exemptions available.

If you have questions about how a particular asset should be handled, ask the professionals. Talk to your estate planning attorney or accountant.

Last, don’t forget to provide copies of your list to the Trustee, your accountant, and your attorney. Establishing a revocable living trust avoids probate court, but filing your list of assets and keeping good records will make handling your estate a lot easier for your beneficiaries.

Kira S. Masteller is a California Trust and Estate Planning Attorney. Call her at 818.990.2120 if you have questions regarding funding a trust, probate or estate planning for yourself or your business interests.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Tuesday
Oct112011

Maximizing Your Annual Gift | Tax Free Gift Exemption

Trusts & Estate Planning Attorney

 

by Kira S. Masteller
818.907.3244

 

If your estate is valued over the Federal estate tax exemption ($5,000,000 in 2011 and 2012 and returning to $1,000,000 in 2013), you should consider making annual gifts to your family now so that those assets that would be received by the family anyway, will NOT be exposed to unnecessary estate taxes .

 

Your estate includes your:

▪ real estate,
▪ bank accounts,
▪ investments accounts,
▪ retirement assets,
life insurance,
▪ personal property, and
▪ all other assets

Annual Gifts that Don’t Keep on Giving (to the Government)

 

You are allowed to give $13,000 to as many individuals as you desire each year prior to December 31st without having to report the gift to the IRS, and a gift of $13,000 or under will not reduce your lifetime Gift Tax Exemption (presently $5,000,000; scheduled to return to $1,000,000 in 2013).

This means that you can give your son $13,000, his wife $13,000, and each of his three children $13,000 so that you have removed $65,000 that would be taxed at a rate of 35 percent (in 2011-2012; may return to 45 percent in 2013) if you left it in your estate and paid estate tax upon your death.

You can also directly pay tuition for students (your children, grandchildren and great- grandchildren), and health care expenses without affecting your lifetime Gift Tax Exemption. This is another way to help your family and reduce your exposure to Federal estate tax at the same time.

Of course when you have less assets in your estate, you may earn less income. This is something to consider prior to making gifts. Alternatively, if you are paying excessive income taxes, by reducing your income annually, you will pay less income tax annually.

If you have any questions regarding making annual gifts, you should contact your estate planning attorney or accountant to determine whether or not you should plan to make annual gifts to reduce the value of your estate.

Kira S. Masteller is a California Trust Attorney in our Trusts and Estate Planning Practice Group. For more information, call Ms. Masteller at 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120