■ Beneficiaries on the Hook: A recent case held that the beneficiaries of an estate who were serving as trustees were liable for unpaid estate taxes. Johnson, DC Utah, May 30, 2012. )
■ Trustee Not Liable on Change in Insurance Policies: Wachovia was the trustee on an insurance trust and structured a 1035 exchange through its insurance subsidiary. Trust beneficiaries challenged Wachovia for self dealing, the loss in cash value and more. The court found Wachovia had done its job right and held it had no liability. However, there are some important lessons in this case for anyone serving as trustee. The most obvious and most important lesson, which few individual trustees seem to get, is that being a trustee is serious stuff. Wachovia did the job right, but few individual trustees seem to. First, the trust agreement permitted self dealing. Few individual trustees really understand the trust documents and fewer still meet periodically with an estate attorney to review their responsibilities under the trust.French v. Wachovia Bank, N.A., 2011 U.S. Dist. LEXIS 72808 (E.D. Wisconsin 2011)
■Employer Owned Life Insurance: EOLI has strict reporting requirements in order to avoid having insurance proceeds taxable. In a recent ruling the IRS gave an employer some leeway in accepting the agreement between the employer and employees as meeting the notice requirements although the employer failed to obtain from its employees the specific documentation required by the “notice and consent” requirements of Code Sec. 101(j)(4). PLR 201217017. While the ruling was quite favorable to the taxpayer it points out what could be an extraordinarily costly tax trap for many businesses who have been lax with the 101(j) requirements, or even ignored them. This should serve as a reminder call for any business owner with life insurance on the lives of any employee, even key owners.