Special points of interest:

Practice Management

Recent Updates

TEdec Support/

Customer Care

TEdec

Systems, Inc.

TEdec Times

Inside this issue:

Practice Management 1

New Releases 2

From the Desk of the

President

2

Cases and Rulings of

Current Interest

3

Common Questions 4

SUMMER 2014 VOLUME XIV, ISSUE 2

We’re on the web

www.tedec.com

Route to: 1) _______ 2) _______ 3) _______ 4) _______

PRACTICE MANAGEMENT Ethical Hazards in a Digital World

Douglas M. Wade in an article entitled “Ethical Hazards in a Digital World” in the May/June 2014 edition of the GP Solo, starting at page 42, makes very interesting and insightful comments with regard to ethical considerations when

using the internet. Here are some of his comments:

Mobility and the Cloud

“As technology continues to advance, it will continue to change the way we do business. Today’s attorney accesses files securely by way of a Virtual Private Network (VPN), pays third parties to maintain copies of client files, and

accesses files on demand by way of the cloud. Although slow to respond, ethics boards have started to address the ethical challenges created by these new technologies. On September 20, 2010, the New York State Bar Committee on Professional Ethics Opinion #842 determined that attorneys may use an online storage system to store client files provided the “lawyer takes reasonable care

to ensure that confidentiality will be maintained in a manner consistent with the lawyer’s obligation under Rule 1.6” The opinion continues, stating that lawyers must … stay abreast of technological advances to ensure that the storage system remains sufficiently advanced to protect the client’s information, and should monitor the changing law of privilege to ensure that storing the

information online will not cause loss of waiver of any privilege. ABA New Model Rule 1.6(c) requires that ‘A lawyer shall make

reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.’”

How to Keep it Safe

The Internet’s not written in pencil...it’s written in ink. The Social Network (2010).

“Every lawyer needs a basic knowledge of how the Internet, digital storage, and digital encryption work and must take steps to ensure the security of the confidential materials contained in the tools that they use. Every device with memory is an ethical violation waiting to happen. Lawyers should encrypt all digital storage devices at the disk level. Mobile devices also should be equipped with kill switches — commands that

“brick” or deactivate the device on connection to the Internet should they be lost or stolen. Should you need to transmit confidential data electronically, encrypt the data using “strong” passwords that combined letters, numbers, and symbols. For access to office networks, utilize modern two-factor authentication, a security process requiring entry of two forms of identification to access secure client data (some two-factor systems require a card and a

password, others text a random password to a smartphone upon entry of a memorized password, with access granted upon entry of both passwords). Finally, see a competent IT professional should you have questions.”

Page 2

From the Desk of the President Our primary objective is to provide you with the best fiduciary accounting and administration software for your trusts and estates practice, and to provide the best support in the industry. From the accolades we have received, we are succeeding! Our goal is to enhance your trust and estates practice and to make you more productive and effective. We also continue to work on additional enhancements, which we believe will further improve your productivity. As always, if there is anything we can do to improve TEdec, please let us know. We appreciate and look forward to your comments and suggestions.

Teddar S. Brooks President/CEO

TEdec v. 6.3.9.p.16c.13

TEdec has issued the update 6.3.9.p.16c.13, on or about July 28, 2014, which includes:

1. A new principal and income folder in the Masterfile - this will help assure that TEdec generates transactions appropriate for

your jurisdiction.

2. Annual Trust Accounting - new format is repaired.

3. Schedule D - covered and uncovered sales reports now allow for a date override in preparation of the reports.

4. The New York Inventory - updated. TEdec now allows you to print a New York Inventory with only non-probate assets.

Modification/Termination of an Irrevocable Trust. In this case the settlor and co-trustee of an irrevocable

trust, together with the beneficiaries thereof, petition the Court to terminate the trust. The other co-trustee

objected, as the requirements of § 736.04113 had not been satisfied – the purpose of the trust remained

unfulfilled. The Trial Court and the Appellate Court both concluded that under Florida Common Law, the

Courts have authority to modify or terminate any irrevocable trust upon consent of the settlor and the

beneficiaries, even if doing so defeats the purpose of the trust. The Court noted that § 736.04113 provided

that the provisions thereof are in addition to and not in derogation of the common law. Peck v. Peck, 2014

WL 768827 (Fla. 2d DCA 2014) (not yet final).

Rev. Proc. 2011-48 and Schedule PC. For any IRC § 2053 deduction not falling within one of the specific ex-

emptions in the regulations (which would allow the deduction), Tres. Reg. § 20.2053-1(d)(5)(i) provides that in

order to preserve the potential benefit of such a deduction, a protective claim for refund may be filed at any

time before the expiration of the period of limitation for filing a claim for refund, in accordance with guidance

that may be provided by the IRS. On October 14, 2011, in Rev. Proc. 2011-48, 2011-42 I.R.B. 527, the IRS

provided detailed guidance on how to file a protective claim for IRC § 2053 deductions disallowed at the time

of filing the Form 706 under the 2009 final regulations. Section 3 of Rev. Proc. 2011-48 makes clear that it ap-

plies to protective claims for refund regarding deductions only under IRC § 2053. Thus, the use of Schedule PC

is not available for any deduction under any Code section other than IRC § 2053. Following the procedures set

forth in Rev. Proc. 2011-48 for IRC § 2053 protective claims are important because, if such procedures are not

followed, the taxpayer will not have the benefit of limited review described in Notice 2009-84 and section 5.01

of Rev. Proc. 2011-48.

Legislative Update - Florida Trust

Accountings. Florida Law provides

that the trustee of an irrevocable

trust must provide a trust accounting

to each qualified beneficiary

annually. Florida Statute § 736.0813.

Ademption: Sale of Specifically

Devised Real Estate by Agent Does

Not Cause Gift to Adeem. The

Arkansas Supreme Court reversing a

lower court adopted the intent theory

of adoption. According to the Court if

specifically devised property is sold

by a POA of an incapacitated

testator, and the testator does not

regain testamentary capacity before

death, no ademption will take place

as to the unexpended, identified

proceeds of the sale. Rodgers v.

Rodgers, 406 S.W.3d 422 (Ark 2012).

Duty to Inform Trust Beneficiaries:

Schedule K-1 Not Sufficient. In In re

Ro. H. Brennenmann Testamentary

Trust, 838 N.W.2d 366 (Neb. Ct.

App. 2013), the Nebraska Inter-

mediate Appellate Court held that

the receipt of a K-1 beneficiary does

not satisfy the reporting require-

ments of the Uniform Trust Code

(although in this case the resulting

breach was cured by the trustees

subsequently filing their account).

Life Estate: Life Tenant with

Unrestricted Power of Sale Does Not

Owe a Fiduciary Duty to Remainder

Beneficiaries. The Massachusetts

Appellate Court in Alford v. Thibault,

990 N.E.2d 93 (Mass. App. Ct.

2013) held (affirming the lower

court) that the life tenant is only held

to a good faith standard and upheld

the trial court dismissal of a claim

finding that the life tenant with

unfettered power of sale does not owe

a fiduciary duty to remainder

beneficiaries.

Taxation of Trusts: Inter Vivos Trust

Moved from State of Creation

(Illinois) is Not Liable for that State’s

Fiduciary Income Tax. In Linn v.

Department of Revenue, 2 N.E.2d

1203 (Ill. App. Ct. 2013), the

intermediate appellate court,

reversing the lower court, held that

the imposition of the tax violated due

process because the trust has

insufficient contacts with Illinois. In

this case after the settlor’s death the

successor trustee of one of the trusts

exercised the power of appointment

given the trustee and appointed the

trust property to a new trust for the

beneficiary of the original trust, the

new trust be governed by Texas law.

Portability. The IRS in Rev. Proc.

2014-18 has created a simplified

method for taxpayers to obtain an

automatic filing extension so that

they can claim portability exclusion,

even though they did not file a tax

return because of insufficient assets

to trigger the estate tax filing. This

ruling grants an extension to Dec. 31,

2014 for deaths occurring before

2014. Rev. Proc. 2014-18.

Surrogate Court has Jurisdiction to

Fix and Determine Fees of Out of

State Law Firm. The Appellate

Division (reversing the Surrogate’s

Court) held that the Surrogate did

have jurisdiction to set fees of an out

of state law firm because they were

incurred for the benefit of the estate,

and because their payment clearly

affects the administration of the

estate. Further, the matter was

remanded to the Surrogate to

determine the reasonableness of the

fee, and if the Court determined that

any part of the amount paid exceeds

a fair value for the services rendered,

a refund may be ordered. Matter of

Askin, 113 A.D.3d 72, 976 N.Y.S.2d

492 (2d Dep’t 2013).

Page 3 VOLUME XIV, ISSUE 2

CASES AND RULINGS OF CURRENT INTEREST

Don’t get bogged down

with historical reconstruction, TEdec

can help meet your time deadlines.

TEdec Service Bureau

TEdec Systems, Inc. through its service bureau,

can assist you with the following:

Upload Data into TEdec; Prepare Reports:

Court Inventories Court Accountings

Annual Trust Accountings Annual Guardianship Reports

A Host of Management

Reports.

Give AMBER a call at TEdec Support (716-938-9137)

and she can give you a quote on any of these items.

Page 4

Common Questions

at TEdec Support/Customer Care

TEdec Systems, Inc.

207 Court Street, Little Valley, New York 14755 Tel: 716-938-9137

www.tedec.com

As always, should you have any questions concerning the TEdec Program, please do not hesitate to call TEdec Support/Customer Care.

TEdec has added a new component in the Entity Masterfile called the P&I Folder. This is what it looks like:

The purpose of the P&T Folder is to identify specific options from the UPIA that could affect journal entry and to standardize the data entry for those items. Our objective is to minimize errors by data entry users. The spe-cific options selected in the current program include: 1. The reporting of short term capital gains on Mutual Funds. UPIA 401. 2. The reporting of period payments (including accrued interest) as income collected. UPIA 302(b) 3. The reporting of royalties or other receipts from natural resources (UPIA 411 & 412) and liquidating distri-

butions (UPIA 410) have numerous allocation options available between Accounting Principal and Income. TEdec has listed the option most commonly adopted by the various states. Whatever the user selects in the MF Õ P&I Folder will provide defaults when setting up a Completrac Account.