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1. Administrator of Fund can be Sued Under ERISA 2. Charitable Trust, Understand How To Determine "Life" W/O Trap as Abusive 4. Financial Services Website ~ "Jurisdiction" 1 Company Hired to Manage Funds May Be Sued Under ERISA Administrator Liable Under ERISA Where an outside company that was hired to receive contributions and distribute benefits from a union welfare fund paid itself some of the fund's assets, it may be liable under ERISA, says the Third Circuit in reversing a dismissal. The fund gave the company day-to-day authority over its assets and authorized it to write checks and make payments. When its services were terminated, the company paid itself about $43,000 from the fund's account. The fund sued under ERISA. The company argued that it wasn't a fiduciary because it had only acted in a ministerial capacity and didn't exercise discretionary control over the management of the fund. But the court said that the company was acting as an ERISA fiduciary so long as it had "authority or control over the management or disposition of plan assets." "We are inclined to agree that ERISA does not consider as a fiduciary an entity such as a bank when it does no more than receive deposits from a benefit fund on which the fund can draw checks. The allegations in the complaint, however, do not describe [the company's] role as so circumscribed. Rather, [it] alleges that the [fund] delegated to the defendant the day-to-day responsibility to control, manage, hold, safeguard, and account for [its] assets and income... "At this stage we are left with substantial doubt that there exist no facts that might establish that [the company] did indeed exercise such authority and control over the management and disposition of [the fund's] assets so as to come within the statutory definition of a fiduciary. Further development is required and on this record we cannot say that, as a matter of law, [the company] is not a fiduciary." U.S. Court of Appeals, 3d Circuit. Board of Trustees of Bricklayers and Allied Craftsmen Local 6 of New Jersey Welfare Fund v. Wettlin Associates, Inc., No. 00-1382. January 8, 2001. Lawyers Weekly USA No. 9919822.
2 'Abusive' Charitable Trusts Are Targeted  Charitable Trusts - Inadvertent "Abusive" Charitable Remainder Trust T.D. 8926 Charitable Lead Trust T.D. 8923 Taxpayers are prohibited from using "abusive" charitable remainder and lead trusts to avoid taxes, under final regulations issued by the IRS. The regs are intended to prevent "inappropriate tax avoidance," the Service said. Typically, a charitable remainder trust allows a beneficiary to receive income for life, with the corpus going to charity when the beneficiary dies. In a charitable lead trust, income is paid to a charity for specified term, at the end of which the balance of the trust assets goes to a designated beneficiary. Some taxpayers try to avoid taxes by contributing highly appreciated assets to a charitable remainder trust, then borrowing money and treating the payout to the beneficiary as tax-free. In abusive charitable lead trusts, the payout is based on the life expectancy of a young person who is ill and has a limited life expectancy. But because an average person of that age would live for a long time, the charitable interest has a high value. When the individual dies and the trust ends, the charity ultimately receives a smaller payout than the value of the charitable deduction. The final regs makes such transactions illegal. The restrictions on charitable remainder trusts apply to distributions made after Oct. 18, 1999. The restrictions on charitable lead trusts apply to transfers made on or after April 4, 2000. The rule for charitable remainder trusts is T.D. 8926. The rule for charitable lead trusts is T.D. 8923. You can read, print or download the full text in the "Important Documents" section of Lawyers Weekly USA's Internet site:
Charitable Remainder Trust T.D. 8926 Charitable Lead Trust T.D. 8923
3 IRS Proposes New IRA Distribution Rules By James L. Dam The rules for withdrawing money from IRAs and other retirement plans
have been extensively revised by new regulations proposed by the IRS.
For estate planners, the changes make "stretching out" the
withdrawals from clients' IRAs tremendously easier, experts say.
As to IRAs, the rules can be relied on immediately, even though they
technically do not go into effect until Jan. 1, 2002, the IRS states.
As a result of the changes, "All the old arcane rules are out
the window," says Seymour Goldberg of Garden City, N.Y., author of J.K
Lasser's How to Protect Your Retirement Savings From the IRS.
Planning for IRAs is "vastly simplified," says Boston
attorney Natalie Choate, author of Life and Death Planning for
Retirement Benefits. The rules "are so much better, I can't
believe it. They are so much more sensible and flexible and can really
reduce taxes for a lot of people."
"It's pretty exciting stuff," agrees Robert Keebler, a CPA
in Green Bay, Wis., who is the author of a book on IRAs.
Lawyers will want to review clients' plans and make changes in many
cases to take advantage of the new rules, experts agree.
Even where an IRA-owner has already died and the heirs are making
withdrawals, "Those situations should be reviewed, because you may
be able to switch to something more favorable," says Choate.
The biggest change in the rules is that the rate at which money has
to be withdrawn will no longer be determined by decisions the client
makes at age 70 1/2 as to the designated beneficiary and which life
expectancy "method" to use in calculating the withdrawal rate.
The client will no longer be "locked in" by those
decisions, says Keebler.
Because of the new flexibility, which continues for a year after the
client dies, clients "can choose their beneficiary based on who is
the best beneficiary, instead of being affected by how much they will be
required to take out of the IRA," says Choate.
Older clients who made decisions at age 70 1/2 may now want to change
them.
"There is a fresh start," says Goldberg. "People who
loused up can fix and repair all existing errors."
The new flexibility removes a disadvantage that regular IRAs have had
compared to Roth IRAs, and so there is less pressure for clients to
switch to a Roth IRA, says New York estate planning attorney Bruce
Steiner.
The new rules contain a table that clients can use to determine their
minimum withdrawals prior to their death, unless their designated
beneficiary is their spouse and he or she is more then ten years younger
than they are.
They also contain changes that make it easier to leave an IRA to a
trust, including the elimination of any requirement that a copy of the
trust be provided to the "plan administrator" by the time the
client reaches age 70 1/2.
The new rules replace proposed regulations issued in 1987.
They were issued on Jan. 11, 2001, and were published in the Jan. 17 Federal
Register.
You can read, print or download the full text of the rules in the
"Important Documents" section of Lawyers Weekly USA's Internet
site:
Website Isn't Enough To Create
Jurisdiction Even though a company's website can be accessed by customers in a
different state, the company can't be sued there, says a U.S. District
Court in Illinois.
The plaintiff was a California-based financial services company. The
defendant was an Indiana company with a website that allowed customers
in Illinois to access financial planning information and contact the
company by e-mail. However, the site didn't accept orders or requests
for services.
The plaintiff argued that this was enough for jurisdiction.
But the court disagreed.
"The site allows clients and potential clients to gather
information as well as contact [the defendant] via e-mail [H]owever the
only exchange of information over the site is through informational
e-mails, and [it] does not allow customers to enter into contracts or
receive financial planning services over the Internet. Consequently,
personal jurisdiction over the defendant based upon the existence of its
web site is inappropriate."
U.S. District Court for the Northern District of Illinois. First
Financial Resources v. First Financial Resources, Corp., No. 00 C 3365.
November 8, 2000. Lawyers Weekly USA No. 9919811. |
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