Georgia Wills & Trusts: May 2007 Update

Legal Developments

Increased Federal Tax Exemptions for 2006, 2007, and 2008 (effective January 1, 2006)

Applicable Exclusion Amount: $2,000,000

GST Exemption Amount: $2,000,000

Guardianship Code changes Guardian terminology and adopts form for Designation of a Standby Guardian

The new Guardianship Code (O.C.G.A. § 29-2-9 et. seq.) effective July 1, 2006 provides a procedure by which a parent or guardian of a minor may choose an individual who will serve as the minor's standby guardian if the designating individual becomes incapacitated.  The terminology has changed from guardian of the person to guardian and from guardian of the property to conservator.  This standby guardian may serve for 120 days without court appointment and thereafter may petition for formal appointment as the minor's guardian.  New Law & Strategy Question 5 and 793; Revised Question Text and Tags for Question 793, 794, 795, 798, 801, 802 and 805.

Total Return Legislation: Unitrust Provisions

In 2005 Georgia adopted what is known as ‘total return legislation’ (O.C.G.A. §53-12-220 and §53-12-221)  The law now allows a trustee to make adjustments from income to principal or vice versa.  It also allows a trustee to convert a trust to a unitrust format where income is defined as a percentage of the fair market value of the trust each year.  New Question 887.

IRS issued eight new Revenue Procedures Addressing the Use of Unitrusts in Charitable Remainder Trusts

These new documents, issued August 22, 2005, do not change any specific laws, but are a welcome guide for counsel drafting charitable remainder unitrusts.  The full text is provided in Revenue Rulings and Procedures in Resources in the Georgia Wills & Trusts title.  They are briefly summarized as follows:

1.  Rev. Proc. 2005-52; 2005-34 IRB 326 One Life Unitrust

2.  Rev. Proc. 2005-53; 2005-34 IRB 339 Term of Years Unitrust

3.  Rev. Proc. 2005-54; 2005-34 IRB 353 Two Life Separate Property Unitrust

4.  Rev. Proc. 2005-55; 2005-34 IRB 367 Two Life Joint or Community Property Unitrust

5.  Rev. Proc. 2005-56; 2005-34 IRB 383 Test. One life unitrust

6.  Rev. Proc. 2005-57; 2005-34 IRB 392 Test. Term of Years Unitrust

7.  Rev. Proc. 2005-58; 2005-34 IRB 402 Test. Two Life Separate Property Unitrust

8.  Rev. Proc. 2005-59; 2005-34 IRB 412 Test. Two Life Joint or Community Property Unitrust.

Rev. Proc. Charitable Remainder Trusts: Question 1.

Internal Revenue Service Acquiesces in Walton Decision

In Walton v. Commissioner, 115 T.C. 589 (1993), the Tax Court determined that a taxpayer could structure a Grantor Retained Annuity Trust so that there was no gift tax.  It invalidated the infamous Example 5 under §25.2702-3(e) of the Regulations, which the Service had interpreted to ascribe some actuarial gift interest regardless of the terms of the trust.   Although the Service's appeal of Walton was cautiously anticipated, it never materialized.  Instead, the Service issued Notice 2003-72, 2003-44 IRB 964, acquiescing in the Walton holding (that Example 5 was invalid).  Former Question 187 (Spouse Annuity Interest) has been deleted; Law and Strategy has been revised at Questions 128, 194 and 195.

Updated Product Features

General Review of Federal Tax Issues by Carlyn McCaffrey and John C. McCaffrey

In the course of developing Lawgic’s New York Wills & Trusts the authors have consulted extensively with Carlyn McCaffrey and John C. McCaffrey.  [For the McCaffreys’ professional biographies see Help, About our authors or the Lawgic web site.]  This has led to the addition of new options, clarification of commentary, and the modification of document language primarily in those portions of the program dealing with federal tax issues. 

New Designation of Standby Guardian Document

A new document designating a standby guardian in conformity with O.C.G.A. § 29-2-9 et. seq. has been added.  New Questions 1098-1117.

New Option to Specify IRD Gift to Spouse

When drafting a preresiduary marital gift you may now specify whether income in respect of a decedent will be treated as a specific gift to avoid acceleration of income in the estate. New Question 281.

New Option to Include State Gap Provision for Property in Other States

You may now specify the creation of a State Marital Tax Trust to cover states that have decoupled their death tax exclusions from the federal applicable exclusion amounts.  New Question 284.

Question Tag Expanded For “Same Trustee for Disability or Death”

The question tag is the abbreviated version of each question, which is shown in the navigator and at the top of the screen when the question is viewed.  The previous tag was Same Trustee for Disability.  The expanded tag makes clear that this question applies whether the client is disabled or deceased.  Question 720.

New Option to Include Statement that Children Not from the Current Marriage are from a Prior Marriage

When either spouse has children who are not from the current marriage you may now include a statement, when appropriate, that these children are from a prior marriage.  New Questions 64 and 70.

New Options to Specify “5 and 5” Withdrawal Rights

The 5 and 5 provisions now allow you to specify a fixed dollar limit without any associated percentage limit.  The long form also allows you to specify whether the controlling limit will be the greater or lesser of the dollar limit and the percentage limit.  These changes allow greater customization of the withdrawal provisions where the value of the trust is high. Questions  328-333, 405-410, 453-458, 505-510 and 550-555.

New “Auto-Year-End-Update” Feature for Tax Numbers in Law & Strategy

When the your computer’s clock rolls over to January 1 the tax numbers displayed in Law and Strategy such as the Applicable Exclusion Amount, the GST Exemption and the Maximum Estate Tax Rate, will automatically change to reflect the correct amounts for the new year.  Note that as a side effect of this convenience it is now important to make sure that your computer’s date is correct in order to display Law & Strategy for the current year.

New Option to Defer GRAT Annuity Payments

You may now allow annuity payments to be deferred for up to 105 days.  Note that this deferral is permitted by Treas. Reg. §25.2702-3(b)(4), but there is no guidance what impact, if any, such a provision would have on the valuation of the Grantor's retained interest in the GRAT.  Question 129.

New Options for “5 and 5” Provisions

You may now specify a “short form” or “long form” 5 and 5 provision.  The short form is basically our standard provision from previous releases.  The long form allows payments during the year as advancements against an annual amount with provision for adjustments at the end of the year.  You may also specify whether or not to delay withdrawal rights for fifteen months after death to avoid interfering with any QTIP election.  Questions 328, 405, 453, 505, 550.

New Option to Specify Trustee Removal Power on Reaching Age

You may now specify whether a single beneficiary for whom a trust has been created shall have the power to remove the trustee upon reaching a certain age.  You may also specify that exercise of this power requires the appointment of an Independent Trustee to serve as successor.  Questions  766 and 767.

New Option to specify GRAT Annuity Calculation Method

You may now specify an annuity percentage or use a formula, which specifies the total annuity payments as a percentage of the initial FMV of the trust assets.  New Questions 130, 131, and 132.

Date of Will Now Appears on Cover Page

If you leave the day of execution unspecified (e.g. “May  ___ 2007”) remember to fill in the actual date on the cover page as well as on the signature page at the time of execution.

Question Tag Expanded for “No Spouse or at SS death: Allocate GST?”

The question tag is the abbreviated version of each question, which is shown in the navigator and at the top of the screen when the question is viewed.  The previous tag was “No Spouse: Allocate GST?”  The expanded tag makes clear that this question applies both if there is no spouse and at the death of a surviving spouse.  Question 302.

"How To" Expanded for GST Exempt Trusts and Special Trusts

“How To” is the first choice at Question 1.  It provides useful instructions and helpful suggestions on many areas of Lawgic use.  One of the most frequently consulted options is “Create various trusts on death.”  The sections on “GST Exempt Trusts” and “Special Trusts” have been expanded for greater clarity.  These clarifications have also been added to “Question Help” at the specific decision points involved.  Questions 15, 282, and 573.

New Automatic Identification of Minor Children in Medical Power of Attorney for Minor Child

The program will now automatically calculate and present a list of all the minor children of the party for whom you are drafting a Medical Power of Attorney for minor child (and the spouse’s minor children as well if you have selected “Treat Spouse Children as Own?” at Question 53).  You may select any subset of this list for inclusion in the document.  Question 1 091.  Former Question 1122 (Reference to Minor(s)) has been deleted as no longer necessary.

Additional Documents Included in Sending Documents Cover Letter

The Medical Power of Attorney for minor child may now be included as an enclosure in the Sending Documents cover letter.  Question 1267.

Note: Most users will already have the following three functions on their systems since they have been included in the annual renewal installation.  They are summarized here to make certain that you are aware of them.

New AutoSave Function

You should continue to save your answer file as you work, especially before you exit the program.  Lawgic continues to prompt you to do so.  However sometimes you may forget, or a power outage may shut down your computer when you have not saved for some time.  A new AutoSave feature can help you recover more of your work.  Lawgic now automatically saves a separate copy of your answer file to LGCTMP.ANS roughly every fifteen questions.  Please read Help, Help, Other Features, Recovering Your Work, for detailed instructions on using this file.  If you are using a flag file the AutoSave feature will also save a separate copy of your flag file to LGCTMP.FLG.

New Warning Message when Lawgic is Already Running

Only one instance of Lawgic may run at a time.  Previously, an inadvertent attempt to start a second instance would open a new Lawgic window but the “Select Title/File” box would never appear.  Now, an attempt to start a second instance of Lawgic will display a “Lawgic Already Running” warning box.

New Option to Cancel Application Close Button

Selection of application close button (the X in the upper right corner of the Lawgic window) now displays the same save dialog as the File, Exit and File, Close menu items when a save is needed.  The dialog now displays 3 buttons, No, Yes, and Cancel.  Previously only a No and Yes button were displayed when application close button was selected.