Wills, Trusts & Estates Prof Blog

James Brown Update

According to AP, Judge allows James Brown's partner to choose special guardian for her son, International Herald-Tribune, April 25, 2007:

• Tomi Rae Hynie (James Brown's alleged fourth wife) may select the special legal guardian for her son according to an April 25, 2007 court ruling.
• This guardian will be Stephen M. Slotchiver (attorney, Charleston, S.C.).
• The trustees of James Brown's trust had submitted a list of attorney whom they preferred.
• Now that the court has appointed a guardian, a DNA test on Hynie's child is possible to determine whether James is the father.
• However, the court did not order the paternity test because the child has not yet made a claim against the estate.

Australian Intestacy Laws and Indigenous People

Prue E. Vines (Associate Professor, University of New South Wales) has recently posted her article entitled  Drafting Wills for Indigenous People: Pitfalls and Considerations on SSRN.

Here is the abstract of her article:

Intestacy laws in Australia are grossly inadequate to deal with the inheritance issues of Indigenous people. This paper sets out some of the considerations which are important if wills are to be drafted to meet these needs. The article considers dealing with kinship issues, guardianship and the disposal of the body, but in particular focuses on the use of equitable vehicles to protect customary law obligations and secret knowledge.

Divorce and Step-Child Bequest

In re Estate of Nash, 2007 WL 1163925 (Tex. 2007), Testator’s will left his entire estate to Wife, but if Wife failed to survive him by thirty days, to Step-Daughter.  Testator later divorced Wife but did not change his will.  Wife outlived Testator by more than thirty days.  The trial court determined that Step-Daughter was entitled to Testator’s estate because under Texas Probate Code § 69, Wife is treated as predeceasing Testator because of the divorce.  Thus, the condition of Step-Daughter’s gift was satisfied, that is, legally, Wife did not outlive Testator by thirty days.

The appellate court reversed and the Supreme Court of Texas affirmed on April 20, 2007.  The court recognized that Texas Probate Code § 69 provides that the divorce causes the will to “be read as if the former spouse failed to survive the testator.”  However, the court explained that this reading of the will is only with respect to provisions in favor of the testator’s former spouse and that other will provisions remain undisturbed.  Because the alternative gift was not to Wife, Wife is not legally dead with respect to the condition on Step-Daughter’s gift.  Since Wife was biologically alive thirty days after Testator’s death, the condition on Step-Daughter’s gift was not satisfied.  Testator’s will lacked another alternative gift and thus Testator’s estate passed by intestacy to his mother and brother.

Moral:  A testator who makes a testamentary gift to a spouse should include express instructions in the will regarding the disposition to be made of that property if they are later divorced paying particular attention to gifts that are conditioned on the spouse predeceasing the testator.  Alternative gifts, unless to individuals who would also be ex-relatives whom the testator would not want to benefit if a divorce occurred, should state, “If [primary beneficiary] does not survive me by [number] days or is otherwise unable to take under this provision of my will, I leave this property to [alternative beneficiary].

Power of Attorney and Multiple-Party Accounts

Below is a summary of Armstrong v. Roberts, 211 S.W.3d 867 (Tex. App.—El Paso 2006, pet. filed).

Power of Attorney

Father named Daughter as his agent under a non-statutory power of attorney.  Using this authority, Daughter opened three pay on death certificates of deposit naming various individuals, including herself, as the pay on death payees.  The court concluded that Daughter had the authority to open the CDs because the power of attorney granted her broad and unlimited powers such as the power “to do any and every act and exercise any and every power that I might or could do or exercise.”

However, the court held that Daughter did not have the authority to designate the pay on death payees.  The court relied on Texas Probate Code § 439(b) which states that a pay on death account requires a written agreement “signed by the original payee.”  Father did not sign the agreement and thus Daughter’s designations were ineffective.

Moral:  An agent lacks the authority to name pay on death payees.

Multiple-Party Accounts -- Designation of Pay on Death Payees

The appellate court held that an agent under a power of attorney lacks the authority to designate a pay on death payee.  The court relied on Texas Probate Code § 439(b) which states that a pay on death account requires a written agreement “signed by the original payee.”

Moral:  An agent lacks the authority to name pay on death payees.

Multiple-Party Accounts -- Language Sufficient to Create Survivorship Rights

The front of the signature card for a joint account read, “Ownership: Joint w suv.”  The court indicated that standing alone, this language was insufficient to create survivorship rights under Texas Probate Code 439(a).  However, the front of the card made express reference to the terms on the back of the card.  The language on the back of the card was substantially similar to the “safe harbor” language of the Code and thus the account had the survivorship feature.

Moral:  To avoid problems, financial institutions should follow the statutory safe harbor language when creating multiple-party accounts and give serious consideration to using the statutory form in Probate Code 439A.

Ohio Trust Code Analyzed

Alan Newman (Associate Professor of Law, University of Akron School of Law) has recently posted his article entitled An Analysis of the New Ohio Trust Code on SSRN.

Here is the abstract of his article:

The Uniform Trust Code (UTC), which was promulgated in 2000, is the first national codification of the law of trusts. It has been adopted, with modifications, in 19 jurisdictions and is under consideration for adoption in many others. The Ohio Trust Code (OTC), which includes many significant modifications from the UTC, was enacted in June 2006, with an effective date of January 1, 2007.

The OTC is the product of extensive study of the UTC by a joint committee of members of the Estate Planning, Trust, and Probate Law Section of the Ohio State Bar Association and members of the Legal, Legislative, and Regulatory Committee of the Ohio Bankers League. Members of the Ohio Probate Judges Association also participated in the process. Input also was received by the Family Law Section of the Ohio State Bar Association, the Ohio Attorney General's office, and many lawyers and bankers across the state. It is a comprehensive codification of trust law in Ohio.

This Article examines the OTC, changes it has made to existing Ohio law, changes made to it from the UTC, policy considerations with respect to its enactment, and various issues it raises, and makes recommendations for changes to it by amendment.

Considerable attention is directed to its creditors' rights provisions. The UTC's provisions on that subject have been among its most controversial (and played a significant role in its defeat in Colorado and Oklahoma, and in its repeal in Arizona).

The OTC's creditors' rights provisions depart significantly from the UTC's and include innovations (for example, a statutory "wholly discretionary trust" and provisions designed to address issues peculiar to special needs trusts for incapacitated persons who are receiving, or anticipate receiving, public assistance) that have received considerable attention. Among the other provisions of the OTC that depart in significant ways from the UTC that the Article addresses are those on the trustee's duty to keep beneficiaries informed about the trust and the settlor's right to modify that duty; the ability of persons interested in a trust to enter into "private settlement agreements;" and the modification and termination of trusts.

Gifts for Religious Purposes

Pauline Ridge (Director of the Centre for Commercial Law, Australian National University - ANU College of Law) has recently posted her article entitled Legal Regulation of Religious Giving on SSRN.

Here is the abstract of her article:

The article considers the legal regulation of religious giving in nineteenth century England. Three leading cases, decided between 1871 and 1887, are discussed. Each case involves a woman of Roman Catholic, or Roman Catholic-like persuasion, making a substantial testamentary or inter vivos gift to the religious body with which she is associated. It is argued that whether the gift was construed as an outright gift or a trust for purposes was crucial to its enforceability. Two key themes are considered: autonomy concerns in relation to religious giving (including reasons why these concerns were more pressing with respect to inter vivos gifts) and the different levels of legal recognition of religious giving. The law during this period took an active role both in managing the relationship of religious groups with the state and in controlling the activities of religious groups; conversely, suppressed religious groups managed to operate around, and outside, the law.

409A and Deferred Compensation CLE

The American Bar Association Section of Real Property, Probate and Trust Law and the ABA Center for Continuing Legal Education is sponsoring a teleconference entitled Ten Items Estate Planners Need to Know About 409A and Deferred Compensation on June 5, 2007.

Here is a description of this program:

On April 10, 2007, the IRS issued final Internal Revenue Code Section 409A regulations relating to nonqualified deferred compensation.  Failure to comply with the section 409A requirements could lead to immediate taxation as well as a 20% penalty.

Attend this teleconference to learn the ten items our expert panel believes every estate planner needs to know about section 409A. This program will focus on the impact of the final regulations on nonqualified deferred compensation and what needs to be done in order to achieve compliance before December 31, 2007.

This program should be of particular interest to estate planners who advise owners of closely-held businesses and executives of publicly-traded companies.

Topics that will be discussed include:

• What is nonqualified deferred compensation?
• Aggregation rules and what to watch out for
• Using the short term deferral exception
• Separation pay exclusion rules and how they work
• The complicated aspects of distribution after "separation from service"
• Initial deferral and re-deferral under the new rules
• The extent that pre-2005 plans are grandfathered
• What should I do now before December 31, 2007?

Toast to the Jolly Testator

Earlier on this blog, I asked for assistance to locate a a poem or other witticism that essentially says that a counselor's best clients are those that fail to plan or forego paying for sound advice.

Thanks to Andrew J. DeMaio (Neff, Aguilar, Cox, Magee & DeMaio, LLC, Red Bank, NJ), we may have located the poem.  It may be Toast to the Jolly Testator attributed to Lord Neaves as follows:

"Ye lawyers who live
upon litigants' fees,
And who need a good many
to live at your ease,
Grave or gay, wise or witty,
whate'er your degree,
Plain stuff or Queen's Counsel,
take counsel of me.
When a festive occasion
your spirit unbends,
You should never forget the
Profession's best friends;
So we'll send round the wine
and bright bumper fill,
To the jolly testator
who makes his own will.

He premises his wish
and his purpose to save
All dispute among friends
when he's laid in the grave;
Then he straightaway proceeds
more disputes to create
Than a long summer's day
would give time to relate.
He writes and erases,
he blunders and blots,
He produces such puzzles
and Gordian knots,
That a lawyer, intending to frame the thing ill,
Couldn't match the testator
who makes his own will.

Commentary on Anna Nicole Smith Lessons

Thomas Kostigen discusses Lessons to be drawn from Anna Nicole Smith's lousy estate plan, MarketWatch, April 24, 2007.

   

Here is an excerpt from his commentary:

Smith's story may be sensational, but it shouldn't be used as something more. Sure if you are wealthy and intend to bequeath amounts that will change people's lives you should properly plan. Or if you are just an average Joe and don't want hullabaloo amongst your relatives when you're gone, you should be clear in delineating who gets what and how much of your assets.
   

But I can't think of anyone who is even close to being in, never mind putting themselves in, the same predicament as Anna Nicole Smith did. The financial-services industry is doing a disservice to people by hopping on the hype and using it as a tool to spin clients 'round on estate-planning education.
   

If it's celebrity and fanfare that are needed to get clients' attention, how about looking at Bill Gates and Warren Buffett, two of the richest men in the world. They are models of a different sort that we should be looking to for insight. And their estate plans are notable, not notorious.

Special thanks to Prof. Joel C. Dobris of the University of California-Davis for bringing this article to my attention.

Blog has Quarter-Millionth Visitor

Sometime yesterday (April 24, 2007), this blog reached a milestone in that it had its quarter-millionth visitor.

I would like to take this opportunity to express my appreciation for your support and the contributions that many of you have submitted.

The two most popular postings have been those about Anna Nicole Smith (no surprise) and a motorcycle trailer which will double as the rider's casket upon death (big surprise).

Never Too Old to Rock and Roll

As proof that it is never too late to rock and roll, check out this video of a group from England called The Zimmers performing The Who's classic My Generation.

Here is some information from the group's website:

Formed in early 2007, The Zimmers are not only the oldest gigging band in the world (with an average age of 78), they are also the most celebrated, having recorded their debut album at the famous Abbey Road Studios, under the watchful eye of Acclaimed Producer Mike Hedges.

Oh and by the way, don't tell them you think this is funny, with more aggression than Nirvana and more talent than The Beatles, these OAP's are here to stay. Their first single 'My Generation' is released on May 14th. Expect it to climb faster than a Stenna Stair Lift!

Other songs in THE ZIMMERS repertoire include 'Firestarter' by The Prodigy, 'When I'm (one hundred and) 64' by The Beatles and the live favorite (Jermain Stewarts worldwide hit) 'We Don't have to take our clothes off (to have a good time)'.

You may also find a discussion of this group on Neil Hendershot's blog.

Estate Tax Deductions

Prof. Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted her article entitled Big Bird Lays an Egg? on SSRN.

Here is the abstract of her article:

The estate of legendary puppeteer Jim Henson encountered some problems when it tried to deduct amounts paid to Henson's estranged wife under a separation agreement as a claim against the estate.

Prof. Gerzog's article also appears in 115 Tax Notes 385 (April 23, 2007).

Helen Walton's Will

Helen Walton died at age 87 on April 19, 2007.  At the time of her death, she was ranked as the 29th most wealthiest person in the world with a net worth of over $16 billion, most of which she received when her husband, Sam Walton (the founder of Wal-Mart) died.

There are reports that her will may leave the vast majority of her estate to the Walton Family Foundation.  If this turns out to be true, the Foundation would go from the 38th largest in the U.S. to number 2, behind only the Bill & Melinda Gates Foundation.

See Jim Hopkins, Helen Walton's death may benefit public education, USA Today, April 23, 2007.

Searching for Quote

A colleague recently sent me the following message:

I am racking my brain trying to remember/find a quote that I remember from a law school textbook.  Perhaps you can help.

It is a poem or other witticism that essentially says that a counselor's best clients are those that fail to plan or forego paying for sound advice.  This poem has a general conclusion that clients pay their attorneys much more when they are not counseled ahead of time.

If you have any idea about the source of this quote, please let me know and I'll pass along the information.

Personal Retirement Accounts

Richard W. Pingel (Associate, Updike, Kelly & Spellacy) has just published his Note entitled Should Social Security Retire? A Study of Personal Retirement Accounts in the American Probate System, 20 Quinnipiac Prob. L.J. 99 (2006).

Here is the introduction to this article:

This article examines the potential effect of the proposed privatization of Social Security on the probate court system while discussing the implications that privatization would have on inheritance, and the notion of individuality and freedom to give property away at death as one pleases--the backbones of the probate system. This article will first explore the history of Social Security, as well as its current status and future outlook. To address the predictions of insolvency in the foreseeable future, several plans have been proposed that would allow individuals to plan their own retirement by managing personal accounts. The assets of these personal accounts would be inheritable, unlike modern Social Security benefits. This article will next explore the implications that personal accounts will have for inheritance, and concomitantly, for the probate court system by examining the arguments of both proponents and opponents of personal retirement accounts. This article will discuss the policy goals and concerns associated with probate courts and, furthermore, whether personal Social Security accounts will align with the probate court system. Finally, this article will analyze the benefits and detriments of personal accounts with regard to the potential impacts on the probate courts.

And here is the conclusion:

The Social Security system, developed in 1935, is perhaps one of the greatest programs developed in the United States. Social Security has been a staple in the lives of the Nation's elderly for seven decades. Unfortunately, the current model of Social Security has not kept pace and evolved with modern American society. As a result, the system is heading towards insolvency; without some type of reform, the system will ultimately fail. The proposals to allow personal retirement accounts would provide retirement security and potentially fix the problems with the current model. The models that utilize personal accounts are consistent with the American values that permit inheritance, ownership, control and choice. Likewise, these same values are echoed in modern probate court proceedings.

The effect on the probate courts is twofold; on one side, the personal accounts will properly align with the social policies of the court, yet on the other hand, the influx of such a new system could be detrimental to the efficiency of today's probate courts. If Social Security is to change, so too must the structure of the probate courts. Such changes can be properly planned for and executed through thoughtful planning and adjudication when necessary. Allowing the use of personal accounts will more properly align the values of the United States Social Security System with the Probate Courts.

Class Gifts and the New Biology

Cameron Krier (J.D. and Law and Science Certificate in Health Law, Texas Tech University School of Law, 2006; M.P.H. candidate, University of Texas Health Science Center at Houston, 2007) has recently published her article entitled Heir on the Side of Exclusion? Addressing the Problems Created by Assisted Reproductive Technologies to the Inheritance Rights of a Class Named in a Funded Trust or Probated Will, 20 Quinnipiac Prob. L.J. 47 (2006).

Here is the conclusion of her article:

A strong argument resounds that children should be afforded the same rights, protections, and application of the law regardless of the circumstances surrounding their birth. Furthermore, the government has, in large part, supported advances in reproductive technologies that have resulted in the birth of many children that would not have otherwise been conceived. The court in Woodward stated, “[w]e do not impute to the Legislature the inherently irrational conclusion that assistive reproductive technologies are to be encouraged while a class of children who are the fruit of that technology are to have fewer rights and protections than other children.” This argument can be used to support the recognition of inheritance rights held by posthumous children to a decedent's estate, but in evaluating the rights of afterborn beneficiaries to a [funded trust or probated will], other interests must be considered.

Excluding afterborn beneficiaries from a class entitled to inherit property from a [funded trust or probated will] will provide timely closure to the estate and will reduce the anxieties associated with ascertaining beneficiaries in the wake of advances to [assisted reproductive technology]. This article does not advocate for the outright denial of inheritance to all [posthumously conceived[ children, only those conceived after the class closes and affecting the distribution of property from a [funded trust or probated will]. Advances in technology should be encouraged and the inheritance rights of children created through [assisted reproductive technology] can be recognized through assiduous drafting of future estate plans. However, with regard to property that must be distributed from a [funded trust or probate will], a class entitled to inherit should not be held open to account for the possibility of afterborn beneficiaries.

Texas Guardianship Law Website

The Guardianship, Probate and Trust Section of Crain Caton & James, P.C. (Houston, Texas) maintains an excellent website, Texas Guardianship and Elder Law Information, as a public service to answer questions and supply information about the Texas Guardianship System. It also contains current case law on Guardianship and Mental Health proceedings along with helpful links to other guardianship materials.

Washington State Recognizes Domestic Partnerships

Yesterday (April 21, 2007), Governor Chris Gregoire of Washington signed legislation authorizing domestic partnerships for same-sex couples and opposite-sex couples if one partner is at least 62 years old.

The legislation will take effect in July.  To register as a domestic partnership, (1) the couple must share a home, (2) each member must not already be married or in a domestic partnership, and (3) each partner must be 18 years old.

According to AP, Wash. State OKs Domestic Partnerships, CBS News, April 21, 2007, domestic partners will have the following rights:

• Health-care facility visitation rights.
• Ability to grant consent for health care for a partner who is not competent. Health care providers could disclose patient information to the patient's partner.
• Automatic revocation of a domestic partner as the beneficiary for nonprobate assets if the partnership ends.
• Automatic revocation of power of attorney granted to a domestic partner if the partnership ends.
• Title and rights to cemetery plots and rights of interment.
• Right to control disposition of a deceased partner's remains, including right to make anatomical gifts, authorize autopsies and consent to remove partner's remains from a cemetery plot.
• Inheritance rights when the domestic partner dies without a will.
• Administration of an estate if the domestic partner dies without a will or if the named representative declines or is unable to serve.
• Making domestic partners beneficiaries of wrongful-death actions. Lawsuits for wrongful death could be brought on behalf of a surviving domestic partner.
• Requiring that information recorded on death certificates inlude domestic partnership status.

Nina Wang Update

Continuing from an earlier discussion on this blog, Nina Wang's vast estate valued at over $4 billion may be passing to Tony Chan Chun-chuen, a 48 year old businessman who is a property investor who practiced feng shui as a hobby.  Tony is married with three children.

Tony is rarely photographed.  The picture accompanying this posting was taken in approximately 15 years ago.

A will contest is likely as there are reports of an earlier will in which Nina left her property to a foundation that would have established a Chinese version of Nobel prizes.

"In a further twist, there are even reports of a third will written just before her death, held by the family, although details of this has yet to be revealed."  See Ronald Lim, Nina Wang's fortune-teller lays claim to her estate, Channel NewsAsia, April 20, 2007.

See also Wang's riches 'for feng shui man', BBC News, April 20, 2007.  Special thanks to Prof. Joel C. Dobris of the University of California-Davis for bringing this article to my attention.