Washington Death with Dignity Update

Choosing Life's End:

The Current Legal Landscape of the Death with Dignity Movement

By Eric Reutter

“There is a certain right by which we many deprive a man of life, but none by which we may deprive him of death; this is mere cruelty.”

― Friedrich Nietzsche: Human, All Too Human

The term "Death with Dignity," also known as physician assisted suicide, refers to when a physician provides a patient with the means for hastening his/her death, most commonly via a medical prescription. The concept of physician assisted suicide is different from the practice of euthanasia, in which a physician administers the lethal medication directly, rather than providing it to the patient for self-administration. While the cultural battle regarding the role of Death with Dignity in our society is a fascinating topic, this article focuses on the legal processes that have led to the current Death with Dignity landscape.

Background: The Supreme Court of the United States Fails to Provide Clear Guidance on End of Life Issues

During the 1990s, the Supreme Court of the United States heard two major cases that dealt squarely with end of life issues. The first major case, Cruzan v. Dir., Missouri Dep't of Health, saw a narrow 5-4 majority hold that a patient has the legal right to refuse life-sustaining treatment. The Cruzan ruling, although in some ways favorable to the Death with Dignity movement, was far from a guarantee that the court would ever recognize physician assisted suicide as a legally protected right. The decision was fragmented, as it contained two concurring opinions, two dissenting opinions, and ultimately granted a great deal of latitude to the states to serve as "laborator[ies]" for procedurally safeguarding patients' rights regarding the refusal of life-sustaining treatment.

In 1997, in Washington v. Glucksberg, the United States Supreme Court was forced to address whether an individual has a constitutionally protected right to physician assisted suicide. A coalition of terminally ill patients and non-profit organizations had brought a challenge to Washington State’s legal ban against assisted suicide. The Court ultimately held that physician assisted suicide was not a constitutionally protected right and, in an attempt to distinguish its Cruzan decision, it remarked that the refusal of life-sustaining treatment was "widely and reasonably regarded as quite distinct" from the decision to end one's life with the assistance of another.

In an effort to distinguish the right to refuse life-sustaining treatment from the right to physician assisted suicide, the court looked to the legal historic treatment of both rights. The Court noted that, while the right to refuse life-sustaining treatment was deeply rooted in the common-law tradition of the courts, the right to assisted suicide has historically been rejected by the legal system. The Court highlighted the fact that, at the time of its decision, almost every state had rejected efforts to permit physician assisted suicide. The Court justified this historical analysis by noting that it is not simply a connection to personal autonomy that brings a liberty under the protection of the Due Process Clause, but rather it is the legal and historic treatment of a right that makes it a "fundamental liberty interest protected by the Due Process Clause."

Justice Rehnquist, however, indicated that a future ruling on the issue might produce a different result, remarking that, "I do not, however, foreclose the possibility that an individual plaintiff seeking to hasten her death, or a doctor whose assistance was sought, could prevail in a more particularized challenge." Although there were no dissenting opinions in the Glucksberg decision, the case produced five concurring opinions and again demonstrated the divergent opinions held by the Supreme Court Justices regarding end of life issues.

In short, the 1990s saw the Supreme Court take the step of recognizing the legal right to refuse artificial nutrition/hydration, but stopped short of declaring that physician assisted suicide is also such a right. What remains unclear, in light of the growing acceptance of Death with Dignity legislation among the states, is whether a future Supreme Court decision on this issue would similarly categorize physician assisted suicide as a right unprotected by the due process clause.

The First Adopters: Washington and Oregon Adopt Death with Dignity Laws by a Popular Vote

In the spirit that the states are the laboratories of democracy, four states have explicitly legalized physician assisted suicide. The first two states to adopt physician assisted suicide, Oregon and Washington, did so by putting the issue before the voters. In 1994, a narrow 51 percent margin of Oregon voters passed Ballot Measure 16, making Oregon the first state in the country to legalize physician assisted suicide. Over a decade later, in 2008, Washington voters followed suit by passing Initiative 1000 with a 58 percent majority.

Recent Trends: The Vermont and California State Legislatures Adopt Death with Dignity Laws

The next two states to adopt Death with Dignity laws, Vermont and California, did so through the passage of bills by state legislatures in 2013 and 2015, respectively. Although Oregon, Washington, Vermont and California legalized physician assisted suicide in different years, the main features of each state's law are remarkably similar. For example, all four states require that the patient have state residency, be within six months of expected death, be over the age of 18, and make three requests to his/her attending physician. It appears, therefore, that these four states have created a general shared template for future Death with Dignity legislation.

The Curious Case of Montana

Whether or not the State of Montana permits physician assisted suicide often depends on who you ask. Although no law has been passed in the state to explicitly allow for the practice, the Montana Supreme Court has ruled that a physician who prescribes lethal medication to a terminally ill, competent adult would be shielded from liability for homicide.

The 2009 case of Baxter v. Montana was predicated on a lawsuit brought by four physicians and a terminally ill leukemia patient, who argued that physician assisted suicide was a protected right under the Montana state constitution. Although the lower court agreed with the plaintiffs and ruled that the Montana constitution grants patients an affirmative right to physician assisted suicide, the Montana Supreme Court resolved this issue on much narrower statutory grounds. The supreme court concluded that a physician would be free from criminal liability in the context of physician assisted suicide because there was "no indication in Montana law that physician aid in dying provided to terminally ill, mentally competent adult patients is against public policy." The Montana Supreme Court, however, did not rule on whether physician assisted suicide was a protected right under the state's constitution.

While some commentators have declared that the ruling of the Montana Supreme Court is effectively a legalization of physician assisted suicide, others have argued that the Court's decision to shield doctors from criminal liability does not go as far as to legalize the practice. The Montana Legislature has failed to resolve this uncertainty, as both advocates and opponents of the Death with Dignity movement have been unsuccessful in their attempts to pass legislation through the state legislature to either ban or condone the practice of physician assisted suicide. In the end, the narrow language used by the Montana Supreme Court has created a situation in which physician assisted suicide is "not against public policy," yet not officially condoned by either the judiciary or the state legislature. It appears that this legal grey-area will remain unresolved until the state legislature can settle the issue.

Interestingly, this very same issue of whether physician assisted suicide is protected by a state's constitution is currently pending in New Mexico's Supreme Court, in the case of Morris v. Brandenburg.

Conclusion: A Gradual Trend towards Death with Dignity Laws

The future of the Death with Dignity movement in the United States seems to be one of slow, state-by-state expansion. General popular opinion seems to be shifting towards acceptance of the Death with Dignity movement, as a 2015 Gallup Poll reported that nearly seven in ten Americans support allowing Death with Dignity. This cultural shift towards accepting Death with Dignity does not seem to be isolated to the United States, as Canada's highest court recently overturned a ban on physician assisted suicide. The decision of Canada's highest court was followed by Prime Minister Justin Trudeau's recent introduction of nation-wide Death with Dignity legislation this past April.

The adoption of Death with Dignity laws in four states, shifting public opinion in favor of the cause, and international trends towards Death with Dignity legislation seems to indicate that other states will continue to gradually adopt Death with Dignity legislation in the future. On the national level, Congress seems too divided to support such a divisive cause in the near future. As Justice Rehnquist declared in the Glucksberg decision, however, it is not inconceivable that the United States Supreme Court would alter course and protect the right to physician assisted suicide in a future decision. Such a move by the Supreme Court depends greatly on the pending appointment of the next Justice, and upon the changing legal landscape of Death with Dignity legislation among the states.

For more information on Estate Planning issues, consider contacting a Kirkland / Bellevue Estate Planning Attorney. 

Our Firm: 

DC Legal, LLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

(425) 889-9300

1031 Exchanges: Seattle Real Estate

 IRS 1031 Exchange: used for investment or business. (Not applicable if used as a primary residence)

Basic Rule: IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

What all of this means in plain English: if you are selling an investment property at a gain, consider using a 1031 facilitator to defer gains. If you are young, it will save a lot in taxes. If you are older, your heirs will get a step-up and take the property tax free upon your passing.

Who qualifies for the Section 1031 exchange?

Owners of investment and business property may qualify for a Section 1031 deferral. (Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031).

What are the different structures of a Section 1031 Exchange?

To accomplish a Section 1031 exchange, there must be an exchange of properties.  The simplest type of Section 1031 exchange is a simultaneous swap of one property for another. 

Deferred exchanges are more complex but allow flexibility.  They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties. 

To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction).  Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property.  Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations.

A reverse exchange is somewhat more complex than a deferred exchange.  It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days.  During this parking period the taxpayer disposes of its relinquished property to close the exchange.

What property qualifies for a Like-Kind Exchange?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements. 

Both properties must be held for use in a trade or business or for investment.  

Note: Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

What is Like-Kind?:

Like-kind property is property of the same nature, character or class.  Most real estate will be like-kind to other real estate.  For example, real property that is improved with a residential rental house is like-kind to vacant land.  One exception for real estate is that property within the United States is not like-kind to property outside of the United States.  Also, improvements that are conveyed without land are not of like kind to land.

Time limits to complete a Section 1031 Deferred Like-Kind Exchange?

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable.  These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters. 

1^st time: crunch: you have 45 days from the date you sell the relinquished property to identify potential replacement properties. 

The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary.  However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient. 

Replacement properties must be clearly described in the written identification.  In the case of real estate, this means a legal description, street address or distinguishable name.

2^nd time crunch: the 1) replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the 2) due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Restrictions for deferred and reverse exchanges?

Taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from 1031 treatment and make ALL gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange.  Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

How do you compute the basis in the new property?

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments.  This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition.  A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction. 

When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

How do you report Section 1031 Like-Kind Exchanges to the IRS?

You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred. 

Form 8824 asks for:

·         Descriptions of the properties exchanged

·         Dates that properties were identified and transferred

·         Any relationship between the parties to the exchange

·         Value of the like-kind and other property received

·         Gain or loss on sale of other (non-like-kind) property given up

·         Cash received or paid; liabilities relieved or assumed

·         Adjusted basis of like-kind property given up; realized gain

What if I have a loan on this property?

A Taxpayer Must Not Receive "Boot" from an exchange in order for a Section 1031 exchange to be completely tax-free. Any boot received is taxable (to the extent of gain realized on the exchange). This is okay when a seller desires some cash and is willing to pay some taxes. Otherwise, boot should be avoided in order for a 1031 Exchange to be tax free.

What the heck is "Boot"?: is the money or the fair market value of "other property" received by the taxpayer in an exchange.

Money: all cash plus liabilities assumed by the other party, or liabilities to which the property exchanged by the taxpayer is subject to.

"Other property": is property that is non-like-kind, such as personal property received in an exchange of real property, property used for personal purposes, or "non-qualified property." "Other property" also includes such things as a promissory note received from a buyer (Seller Financing).

Boot can be inadvertent and result from a variety of factors. It is important for a taxpayer to understand what can result in boot if taxable income is to be avoided. The most common sources of boot include the following:

1)      Cash boot received during the exchange. This will usually be in the form of "net cash received" at the closing of either the relinquished property or the replacement property.

2)      Debt reduction boot which occurs when a taxpayer’s debt on replacement property is less than the debt which was on the relinquished property. Debt reduction boot can occur when a taxpayer is "trading down" in the exchange.

Excess borrowing to acquire replacement property. (Taking a larger loan and receiving cash). Borrowing more money than is necessary to close on replacement property will cause cash being held by an Intermediary to be excessive for the closing. Excess cash held by an Intermediary is distributed to the taxpayer, resulting in cash boot to the taxpayer. Taxpayers must use all cash being held by an Intermediary for replacement property. Additional financing must be no more than what is necessary, in addition to the cash, to close on the property.

Loan acquisition: costs with respect to the replacement property which are serviced from exchange funds being brought to the closing. Loan acquisition costs include origination fees and other fees related to acquiring the loan. Taxpayers usually take the position that loan acquisition costs are being serviced from the proceeds of the loan. However, the IRS may take a position that these costs are being serviced from Exchange Funds. This position is usually the position of the financing institution also. There is no guidance in the form of Treasury Regulations on this issue at the present time which is helpful.

Boot Offset Rules - Only the net boot received by a taxpayer is taxed. In determining the amount of net boot received by the taxpayer, certain offsets are allowed and others are not, as follows:

·         Cash boot paid offsets cash boot received (but only at the same closing table).

·         Debt incurred on the replacement property offsets debt-reduction boot received on the relinquished property.

·         Cash boot paid offsets debt - reduction boot received.

·         Debt boot paid never offsets cash boot received (net cash boot received is always taxable).

·         Exchange expenses (transaction and closing costs) paid (relinquished property and replacement property closings) offset net cash boot received.

Rules of Thumb:

·         Always trade "across" or up. Never trade down (the "even or up rule"). Trading down always results in boot received, either cash, debt reduction or both. The boot received can be mitigated by exchange expenses paid.

·         Bring cash to the closing of the relinquished property to cover charges, which are not transaction costs (see above).

·         Do not receive property which is not like-kind.

·         Do not over-finance replacement property. Financing should be limited to the amount of money necessary to close on the replacement property in addition to exchange funds which will be brought to the replacement property closing.

For more information, consider contacting a Seattle Estate Planning Attorney. 

Our Firm: 

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

T: 425-899-9300

Washington Asset Protection: Saving Ineritence from Creditors

Saving Inheritance from Creditors

Issue: What do I do if I have children or a beneficiary that has creditors after them, but I want to provide for them financially?

Answer: Its tricky, but the best tool is establish a Spendthrift Trust for their benefit.

A valid spendthrift trust is a trust in which the following factors are present:

(1) the settlor (creator) of the trust is not the trust beneficiary;

(2) the beneficiary of the trust has only limited or no control over the trust assets; and

(3) an anti-alienation clause in the trust prohibits both the voluntary and involuntary transfer of

the beneficiary's interest in the trust.

Investment Bonus: A Spendthrift trust need not sit in a simple savings account. It can be structured to invest for growth to increase income to the beneficiaries or prolong its effectiveness.

Spendthrift Trusts in Bankruptcy:

Question: What if my beneficiary needs to file bankruptcy? Is the Trust protected? 

Answer: The Bankruptcy Code has been set up as broadly as possible to include as many of the debtor’s assets as possible, however, careful planning can remove certain assets from the reach of creditors.

USC Code Section 541(c)(2) states (Our Bankruptcy law) say that trusts that have a “restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title.

In plain English, that means if the beneficiary of trust/ debtor can’t control/ reach assets, then those assets will not be a part of the Bankruptcy Estate.

There are three typical categories of trusts purporting to be valid spendthrift trusts where the spendthrift provision may be invalidated thereby bringing the trust assets into the bankruptcy estate:

(1) self-settled trusts;

(2) trusts where the debtor-settlor exercises dominion and control over the trust; and

(3) trusts where the debtor-beneficiary exercises dominion and control over the trust.

Self Settled Trusts and Bankruptcy Code

In ’97, Alaska and Delaware became the first states to recognize self settled (created by the Debtor) trusts for creditor protection. These are referred to "Domestic Asset Protection Trusts". Currently, there are 11 states with such protection: Rhode Island, Nevada, Utah, Oklahoma, South Dakota, Missouri, Tennessee, Wyoming and New Hampshire have since ‘followed suit’. (Note these states have smaller economies and generally are looking for ways to pull money into their economy).

It should be noted that Washington Residents can open trusts in other States for Asset Protection in Washington. We can certainly help facilitate that.

Bottom Line: If you are looking to pass assets to children / grandchildren with creditor problems, or you are going to receive an inheritance and are looking for a way to protect it from creditors, consider a Spendthrift Trust to protect yourself and/or your loved ones.

For more information on Estate Planning for High Net Worth Individuals, consider contacting a Kirkland Estate Planning Attorney. 

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

T: 425.889.9300

Bellevue Estate Planning: Dealing with Student Loans

It’s a worst case scenario: you’re out of school, but

you haven’t found a job yet. You just received your first letter from your student loan servicing company, “welcoming” you as a customer, but all you see is the amount due – and you can’t afford it.

It’s a more common problem than you would expect. Six months, while it sounds like a long time while you’re in school, flies by when you’re out of school. And once your grace period is over, you’re going to have to start paying back your student loan debt. Unfortunately, the Bankruptcy Code provide NO HELP for student loans so many feel helpless. 

Fortunately, for many borrowers, if you can’t afford your student loan payments, there are a lot of options out there. You just need to follow these three simple steps. Whatever you do – don’t fall victim to predatory lenders looking to take advantage of you.

Here’s what to do:

1. Call Your Lender And Discuss Payment Plans

The first step is preventing a financial disaster is to call your student loan servicing company and discuss your payment plan options. Simply not paying your bills and getting your credit hurt is not a viable option in our eyes, so call first and see what you can do.

If you have Federal student loans, you have a lot of repayment plan options. When you first see your statement in the mail, your lender defaults you into the standard repayment plan – which is 10 years of even payments. However, this may not work for everyone.

If you don’t have a job yet and can’t make payments, you should look at an income-based repayment plan such as IBR (Income-Based Repayment) or PAYE (Pay-As-You-Earn). Both of these plans use your income to calculate how much you’ll pay each month. If you have no income, your payments could be $0 per month – legally! Plus, both of these plans offer loan forgiveness at the end.

2. Consolidation

Sometimes, student loan consolidation makes sense. If you have multiple Federal Student Loans, consolidation may be an option to put them into one student loan and get better repayment terms that could make paying them off easier.

For example, you could consolidate your Federal student loans into one Direct Consolidation loan, and extend the repayment period from 10 years to 30 years. Yes, you’ll pay more interest over the course of the loan, but your payments each month will be lower. Furthermore, you may still be able to qualify for the income based repayment plans on your new loan.

To check your eligibility for this, you can go to here. 

3. Ask For A Deferment Or Forbearance 

Finally, if none of the options above make sense, you may simply ask for a deferment or a forbearance.

A deferment is a period of time in which your principal and interest payments are delayed – meaning you don’t have to make them. There are several events that qualify you for a deferment, including being enrolled in school, and being unemployed. 

For more information on Estate Planning, consider contacting a Bellevue Estate Planning Attorney to help get you on the right track. 

Our Firm: 

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

425.889.9300