Recent Developments


Partner's Inheritance Rights:

NY recently recognized a right in a same sex partner to inherit. In the recent case, the Court recognized the validity of a same-sex marriage between two New Yorkers conducted in Canada. Matter of the Estate of H. Kenneth Ranftle, File No. 4585-2008 (N.Y.L.J., Feb. 3, 2009). The Court acknowledged that a person may provide for his or her same sex spouse to inherit his or her estate just as any spouse. The deceased partner's family members should not have legal standing to object to the will. This case continues extends the concepts of an earlier NY case in which the court held that a marriage that was valid under the laws of Canada, Massachusetts or any other state where it was legal, was entitled to recognition in New York. Martinez v. County of Monroe.

Split Dollar and S Corporations: "Make a new plan, stan…" Your family record company, an S corporation, and your life insurance trust ("ILIT") create an agreement to own a large permanent life insurance policy on your life. Your ILIT pays for the economic benefit of the insurance and your S corporation pays for the bulk of the premium. If you get hit by the bus, Gus, the ILIT collects the death benefit and reimburses the S corporation for the premiums it advanced, or the cash value of the policy on death if greater (not the facts in this ruling). Split-dollar can be cool. But what about the tax requirement 1361(b)(1)(D) that an S corporation can only have one class of stock? All shares must have identical rights to distribution and liquidation proceeds.  The key to avoiding problems, Lee, is that the ILIT must pay the appropriate fair share of the insurance cost. Then no special benefit is provided to a shareholder that could violate the one class of stock rules. PLR 200914019. Reality, if you have a health issue the actual cost of insurance could be much greater then the imputed cost and a split-dollar plan, Stan, could result in a real disproportionate benefit, but no tax problem.

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