Wills, Trusts & Estates Prof Blog

Columbia University Asks Court to Exclude White-Only Provision from Trust

Columbia University is seeking to modify the terms of a highly restrictive trust that violates current anti-discrimination laws.

Under the terms of the 93-year-old Lydia C. Roberts Graduate Fellowship, money should be given only to “a person of the Caucasian race” who was born in Iowa and attended an Iowa college or university.  This fellowship also excludes the student from studying in a number of fields, including law and medicine, and requires the student to move back to Iowa for at least two years following graduation.

Columbia is requesting that the State Supreme Court in Manhattan exclude the whites-only provision and modify the Iowa-only rule in the $840,000 trust.

See Columbia U. Seeks to Alter Whites-Only Bequest, Houston Chronicle, May 15, 2013.

New Questions Arise After Hong Kong Allows Transsexual Marriage

Following a court ruling allowing for transsexuals to marry in Hong Kong’s New Territories, new questions have arisen concerning inheritance rights, matrimonial rights, and sex offenses.

By covering male-to-female transsexuals under the definition of “woman,” does a male-to female transsexual lose inheritance rights under Hong Kong’s male-line inheritance?  Does a female-to-male transsexual gain these rights?

Another issue is whether a man with children who chooses to become a female loses her duty to be a “father.”  Also, only women can be raped under Hong Kong law, so can transsexuals be considered victims?

Although the legislature has not yet considered these issues, scholars believe the right to marry will coincide with associated rights of inheritance, divorce, and adoption.

See Patsy Moy and Stuart Lau, Transsexual Marriage Ruling Opens Door to Questions of Inheritance, South China Morning Post, May 14, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

CLE on Beneficiary Designation Problems

The American Bar Association Section of Real Property, Trust and Estate Law will sponsor a CLE entitled, When Good Benes Go Bad or Missing Beneficiary Designation Problems with Qualified Plans and IRAs: How to Identify, Avoid and Fix Them, on May 22, 2013. Provided below is a description of the event:

PANELISTS:
Robert S. Keebler, Keebler & Associates, LLP, Green Bay, WI
Kristen M. Lynch, Fowler White Burnett, Ft. Lauderdale, FL

PROGRAM INFORMATION

TextIt is currently estimated that there are over Five Trillion Dollars currently invested in Individual Retirement Accounts (IRAs) and that these assets comprise approximately 10% of all household financial assets. IRAs, and a staggering amount of tax-deferred employee benefit accounts (which are eligible at some point be rolled into the IRAs) now constitute a meaningful part of estate planning and post mortem planning discussions. Both IRA assets and plan assets are supposed to pass by way of beneficiary designation . . .and yet there is an ever-increasing number of situations in which the beneficiary designation does not appear to name the intended beneficiary, has some execution flaw, or has completely gone missing.

The purpose of this informative webinar is to provide some background on Federal and common State laws that impact IRAs and qualified plans, as well as contractual issues.

The speakers will discuss the types of beneficiary problems that can arise and will discuss various options and approaches towards correcting the problems or mitigating the damage caused, including:

• The impact of ERISA and REA on plan beneficiary designations;
• The deadlines after death within which actions should be taken;
• How to preserve or salvage tax deferral/life expectancy if possible;
• Spousal IRA concerns – community property, divorce settlements, elective share;
• Undue influence and beneficiary disputes – or the IRA version of a will contest;
• Post-mortem possibilities if the named beneficiary has “Special Needs”;
• The issues presented when trusts are named or utilized inappropriately;
• The constant balance between best possible tax deferral and getting the IRA into the right hands; and
• Best practices 

Register now for this program using your ABA ID (00954888).

Check Out Michael Jackson's Estate On 60 Minutes

Today on CBS at 7 p.m. EST, 60 Minutes is showing viewers a special on Michael Jackson’s Estate. Estate’s archivist and Michael Jackson’s friend will give the tour. Viewers will get to see Jackson’s prized possessions like Jackson’s wooden rocking horse given to him by Elizabeth Taylor. Additionally, viewers will dive in to a warehouse filled with Michael Jackson’s belongings. The warehouse includes many of Jackson’s stage costumes and GRAMMY awards. While there is no record of how much the contents in the warehouse is worth, Michael Jackson’s estate has made more money than any other living artist through Jackson’s Immortal tour and music sales. Jackson’s children will inherit the estate when they reach 18 years of age. 

See Susan Ragan, Take A Tour Of Michael Jackson's Estate This Sunday on '60 Minutes', Radio.com, May 17, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Happy Armed Forces Day!!

A special thanks to all my readers who serve or who have served in the military -- your sacrifices and hard work do not go unnoticed and are greatly appreciated.

To read the complete text of the official Armed Forces Day Proclamation, see American Forces Press Service, President Issues Armed Forces Day Proclamation, Elites.tv, May 15, 2009.

Which States Impose Harsh Inheritance Taxes?

Not to be confused with the estate tax, which taxes an estate before heirs receive any payouts, the inheritance tax is taken directly from the heir after receipt of the inheritance.

The six states that impose a tough inheritance tax are New Jersey, Maryland, Iowa, Kentucky, Nebraska, and Pennsylvania.  These states typically charge an inheritance tax between 4% and 16%.  However, most of these states include exemptions for children, spouses, close family members, and charities.

See Dan Caplinger, These 6 States Tax Inheritances the Hardest, The Motley Fool, May 18, 2013.

UK Government Decides Not to Regulate Will Writing

The Legal Services Board protects the interests of consumers in the United Kingdom by overseeing legal regulations.  After a two year investigation, the Legal Services Board recommended that the Ministry of Justice regulate will writing after finding “people’s lives were being ‘seriously damaged’ by incompetence or misdemeanor when drafting wills.”

The Ministry of Justice agreed that there is room for improvement, but rejected the notion that regulations were the right solution.  Although the Government will explore other options to increase consumer confidence in will writing services, the risk of consumers being left with unsuitable wills with no recourse still remains.

See Samuel Dale, Govt Rejects Calls to Regulate Will Writing, Money Marketing, May 15, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

IRS Does Not Include Trust Decanting Rules In Guidance Plan

Recently, tax analyst Marie Sapirie has published an article highlighting the fact that there are no trust decanting rules in the 2012 and 2013 priority guidance plan. According to attorney advisor of the Treasury Office of Tax Legislative Counsel, Catherine Hughes, the omission of the rules was a consequence of the IRS's failure to publish the trust decanting rules in time for the priority guidance plan.  

See Kelly Humke, Tax Notes Article by Marie Sapirie: "ABA Meeting: Trust Decanting Rules Still Getting IRS Attention", Wealthstrategiesjournal.com, May 14, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Renown Con Man Found Dead

Con man Billie Sol Estes, 88, was found dead in his Dallas home. He died of natural causes. Estes was notorious because he committed fraud on many farmers in Texas. As a result, the farmers suffered serious financial harm. Estes secured loans with fictional collateral and swindled all of the money. Consequently, he was convicted of fraud and served time in prison. However, once released Estes was picked up and convicted for fraud a second time. Although he was accused of other instances of tax fraud the indictment was eventually dismissed.

See William Barrett, Swindler Billie Sol Estes, Dead At 88, Is Remembered In Verse, Forbes, May 14, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Elderly Woman Prompts Guardianship Reform After Spending $100,000 to Prove Her Competence

Sophie Paulos, 91, spent three months and $100,000 trying to protect her independence.

The process began when two of her daughters suspected the third daughter of taking advantage of Paulos while her health was deteriorating.  After an investigation by the Adult Protective Services, Paulos had to pay $30,000 for a court-appointed guardian ad litem she never wanted.  She then hired her own attorney to fight the guardianship process and paid over $70,000 for this second lawyer and related legal expenses.

These outrageous costs have prompted proposed measures to reform the guardianship system such as shortening time periods for which to hold hearings and forcing those that initiate guardianship proceedings to sign affadavits.  Although these measures have gained support from organizations like AARP, judges and lawyers across Texas see any changes to the current system as unnecessary roadblocks.

See Andrea Ball, Woman’s Costly Court Battle Prompts Call for Reform of Guardianship System, Austin American-Statesman, May 12, 2013.

Gray Divorce Considerations

Divorces involving older clients (gray divorces) are on the rise.  A few important points to consider following a gray divorce include how to divide the retirement account and what to change concerning the estate plan. 

Pension plans can be divided using a Qualified Domestic Relation Order (QDRO).  A Separate Interest QDRO divides a pension plan by setting aside one spouse’s share, in essence treating the non-participant spouse as if he or she had also been an employee.  It is important to note if the retirement plan is already in pay status, because most plans won’t allow a separate interest if participants are already collecting from the plan. 

A Shared Interest QDRO bases the pension share of the non-participant spouse on the life expectancy of the participant spouse.  Again, it is important to note the pay status of the retirement plan, because “most shared interest plans will not allow the participant spouse to name a survivor beneficiary if one was not named upon retirement, nor can the participant spouse cancel a survivor benefit if one was provided for when the plan went into pay status.”

Under the Massachusetts Uniform Probate Code, divorce will revoke wills, life insurance, trusts, and bequests to relatives of an ex-spouse.  But following a divorce, the best practice is to go ahead and update the will as well as the durable powers of attorney and heath care proxies.

See Andrea Dunbar, Gray Divorce: Retirement Accounts and Estate Planning, Massachusetts Divorce Law Monitor, May 13, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Mother of Heirs to the Doris Duke Fortune Ordered to Explain her Big Spending

Daisha Inman has allegedly blown over $1 million of her children’s $60 million inheritance since 2010. 

Daisha Inman was married to Walker Inman Jr., the nephew of tobacco heiress Doris Duke.  Following his death, the Duke fortune is now held in trust for their twin children. 

Inman “has been ordered to appear in court next month to answer charges that she’s treated their trust funds as a personal piggy bank.”  Inman asserts she has never touched their trust funds and points the finger towards the Citibank and J.P. Morgan trustees who administer her children’s accounts.

See Julia Marsh, Mom of Twin Duke Fortune Heirs Ordered to Court after Allegedly Blowing $1M of their Inheritance, New York Post, May 8, 2013.

24th Annual Estate Planning and Probate Drafting Course

The State Bar of Texas is presenting the 24th Annual Estate Planning and Probate Drafting Course in Houston, TX on October 24-25, 2013.  The course provides 13 hours of MCLE credit, including 2 hours of ethics.  A description of the course is below:

Course Highlights

• Decanting panel
• Drafting for Trust Modifications and Private Letter Ruling Requests
• Pretrial Drafting for Will Contests, Guardianship Disputes and Fiduciary Litigation
• Drafting Fiduciary Powers for Trust Protectors and Independent Trustees
• Drafting for Marital Deduction Planning in 2013

Course Amenities

• Coffee and breakfast provided each morning
• Lunch provided both days
• Complimentary wireless Internet connection in the meeting room
• Convenient access to electrical connections - bring your laptop!
• Networking Social on Thursday night

For those that can’t make it to the live course, a video replay will be shown in Dallas, TX on November 21-22, 2013.

Coming Back From The Dead

In Zimbabwe during his own funeral Dama Zanthe sat up in his coffin. Funeral attendees noticed body movement and were shocked. Luckily, Zanthe woke up before his body was transferred to the funeral parlor that afternoon. Shortly after the incident, he was taken to the hospital and stayed for two days before his release. There have been a few reported incidents in Zimbabwe of the revitalization of the dead. 

See 'Dead' Man Woke Up During Own Funeral In Zimbabwe, Witness Says, Huffington Post, May 14, 2013.

Special thanks to Steve Gonzalez (Attorney at Law, Crikiel & Associates, P.C.) for bringing this article to my attention.

Adoption at Retirement

Recently, New York Times reported there is a growing number of retirees that have decided instead of relaxing during retirement to become parents. More specifically, retired people have turned to adoption. For some retirees this is their second go around at parenting, but for others this is their first time. Some of the retired individuals reason they will be successful parents because of their life experiences and accumulated knowledge. The adoptions are not only for infants,but also include adults. 

See Morgan Yuan, Growing Trend Sees Older Adults Choosing Parenthood At Retirement, Wealth Strategies Journal, May 15, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Marine Painting Worth Thousands

A man who inherited a painting from his deceased father took it to an Antiques Roadshow. The paper work to the painting found in his father’s desk indicated Francis L. Silva painted the artwork, but the man was unsure of the paintings worth. He was pleasantly surprised when the marine painting was valued at $250,000. Silva was a self-taught painter known for his marine paintings. 

See Antiques Roadshow: Man Inherits Painting worth a Boatload, OnAol.com, May 14, 2013. 

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.

Article About Using Remainder Trusts For Transfers

Michael Duffy (Goldman Sachs Strategic Wealth Advisory Team Member, Atlanta, Georgia) recently published an article entitled, Using Remainder Purchase Marital Trusts to Transfer Works of Art, Probate & Property, May /Jun., 2013 at 60. Provided below is the introduction to the article: 

Art collectors routinely ask their tax advisors about strategies that will allow them to make inter vivos completed gifts of some or all of their artwork to remove the art (and any future appreciation) from their taxable estates while at the same time permitting them to retain possession of the art until a later date-which they most often describe as "until the death of the surviving spouse."

The main obstacle to engaging in such strategies is the IRS's ability to include the transferred works in a decedent-collector's taxable estate by invoking IRC Sec.2036(a), which requires inclusion in the gross estate if the decedent-collector retained possession and enjoyment of the art and there was no bona fide sale for adequate and full consideration in money or money's worth. 

Mays v. Porter Provides Guidance on Proving Undue Influence

The Kentucky Court of Appeals recent decision in Mays v. Porter “gave us some guidance on what evidence is sufficient under Kentucky law to set aside a deed based on undue influence."  Liddia Porter sought to set aside a deed conveying her home to Terry and Brenda Mays claiming she was coerced into signing the deed through undue influence.  The trial court held that the deed was the result of undue influence, but not by Terry and Brenda Mays.  Liddia’s husband Charles Foster unduly influenced her to execute the deed by not permitting her to ask questions while their attorney prepared the deed and by exerting physical force over Liddia to the point where she feared for her safety.  The Kentucky Court of Appeals determined this evidence was sufficient to show Liddia would not have executed the deed absent the undue influence of her husband.

See Luke Lantta, Evidence of Undue Influence in Kentucky, Bryan Cave Fiduciary Litigation, May 14, 2013.

Man Dies in Court Fighting Wrongful Foreclosure, Wells Fargo Now Being Sued for Wrongful Death

On December 19, 2012, Larry Delassus, 62, died of heart disease during a court hearing at which he was fighting Wells Fargo’s wrongful foreclosure of his Hermosa Beach condominium.  Deborah Popovich, the estate administrator, is now suing the bank for wrongful death among other charges for forcing the ailing Delassus to needlessly appear in court.

The complaint states that Delassus always made timely mortgage and property tax payments, but Wells Fargo falsely claimed Delassus owed over $13,000 in back taxes, a bank error that really should have been attributed to his neighbor.  Wells Fargo then doubled Delassus’s mortgage payments and then foreclosed on his condo when he was unable to afford the higher payments.  Wells Fargo could have caught this mistake by “verifying his property’s tax identification number with the county” and still foreclosed “even after the county treasurer had confirmed that his property taxes were current and paid.”

Popovich claims that Delassus “succumbed to the pressure of fighting Wells Fargo and the heartbreak of losing his home” and that “Wells Fargo and its agents should be held accountable for their negligent wrongful and malicious actions.”

See Matt Reynolds, Elderly Man Allegedly Dies in Court Fighting Wells Fargo ‘Wrongful’ Foreclosure, AlterNet, May 14, 2013.

Minnesota authorizes same-sex marriage

Starting August 1, 2013, same-sex couples may legally marry in Minnesota.

Governor Mark Dayton signed the enabling legislation on Tuesday, May 14, 2013 after the bill easily passed the Minnesota House by a vote of 75-59.

Minnesota is the 12th state to authorize same-sex marriage.

See David Bailey, Minnesota Senate passes same-sex marriage bill, NBCNews.com, May 13, 2013 and AP, Minnesota governor signs same-sex marriage bill, CBSNews.com, May 14, 2013.