Personal Wealth Law News

As previously reported, Leona Helmsley’s efforts to leave her dog $12,000,000 were rejected by a local court. The dog, reportedly with an unpleasant temperament, was forced to survive on a much smaller sum. The balance of the bequest was to be distributed by the trustees as they saw fit. As it happened, only $100,000 was given by them to dog-related charities. The ASPCA and other charities sought to intervene, to have the trustees give more to satisfy Mrs. Helmsley’s preference for canines, but the court rejected the attempt, saying that it would open the door to many other lawsuits by entities with some connection to dogs. Better, said the judge, to leave the matter to the trustees’ unfettered discretion.

 This decision probably isn’t wrong, but perhaps the judge could have taken some notice of Mrs. Helmsley’s will and requested that the trustees propose a larger allocation of funds to dog-related charities, although still at their discretion with respect to the actual recipients. Although the will made an allocation to a single dog in a foolish way, perhaps the overall intent to benefit dogs could be respected by the trustees and the judge.

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A provision of the Tax Relief Act of 2010 (which has a longer name but, alas, no acronym) extends through the end of 2011 the ability to make a direct trustee to trustee transfer from an IRA to a qualified charity without tax consequences (that is, no recognition of income and no tax deduction). The donor must be at least age 70 1/2 and the limit on the amount that may be transferred is $100,000 per year. The transfer must be from a traditional or Roth IRA; it can’t be from a SEP-IRA or a SIMPLE plan.

 One additional benefit: transfers made through January 31, 2011 can be treated as if made by December 31, 2011. 

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A limited opportunity for making charitable gifts was added to the law in 2006 and will expire at the end of 2007. Under this provision, which is contained in Section 408(d)(8) of the Internal Revenue Code, individuals who have reached age 70 1/2 can distribute up to $100,000 per year, for each of 2006 and 2007, to charitable organizations. The organizations must be public charities (other than donor-advised funds and supporting organizations) or private operating or pass-through foundations. Distributions can be made from any type of IRA, other than a SEP-IRA or a SIMPLE IRA, and must be made directly to the organization. The amount distributed will not be included in the income of the donor, and no charitable deduction will be permitted for the distribution. Further details on how this provision works are included in IRS Notice 2007-7, 2007-5 IRB 395.

Legislation has been introduced to make these kinds of giving opportunities permanent, in the proposed Public Good IRA Rollover Act (you have to admire the people who think up these names). Extensive tax legislation is about to be introduced in Congress, and this proposal might be included in it. 

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For many of us, it’s difficult to imagine that having money is a problem. Most of us work diligently to acquire wealth, and don’t shrink from having more. But the experience of lawyers and other advisers to those who have been successful financially demonstrates that wealth can be both a blessing and a curse to families. A recent talk in Philadelphia by Charles W. Collier, the senior philanthropic advisor at Harvard University, was very enlightening on this subject. Without offering solutions, because no solution can cover every situation, Mr. Collier showed by illustration and interactive discussion how wealth can have a positive effect on families. His book, titled Wealth in Families, repays reading by families who enjoy comfortable financial circumstances. It’s available through Amazon.

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