Wills, Trusts & Estates Prof Blog

How Many Trustees Do You Need?

In her July 12, 2007 article, How Many Trustees Do You Need?, Wall Street Journal writing Rachel Emma Silverman discusses the increasing complexities of modern trusts, among which she notes advantages and disadvantages of having multiples trustees.

Here are some of the ways that she notes trusts are growing in complexity:

• More families are using trusts with teams of multiple trustees or advisers, and some trustees are delegating specific trust assets to outside investment managers.

• Some trusts enlist "trust protectors," who generally have the power to fire and hire trustees.

• Using multiple trustees or advisers may lead to higher fees, state income-tax consequences and legal questions about who is ultimately responsible.

Blog Editor to Take Vacation (Reposting)

Originally posted on July 7, 2007:

Dear Readers,

Starting tomorrow (July 8, 2007) I will be on vacation for three weeks.  In my absence, postings will be made by my research assistant, Elizabeth Storm, who graduated in May from the Texas Tech University School of Law and who is in the midst of preparing to take the Texas Bar.

If you have any suggestions for postings, please forward them to her at elizabeth.storm@yahoo.com. TIA.

Gerry

Copyrights and Estates

Lee-ford Tritt (Assistant Professor of Law, University of Florida Fredric G. Levin College of Law) has published his article, Liberating Estates Law From the Constraints of Copyright, in 38 Rutgers L.J. 109 (2006).

Here are his conclusion and recommendations:

In 2013, copyright authors will begin to feel the full impact of the unintended destructive nature of termination rights. Despite the belief among some copyright scholars that the conflict between copyright law and testamentary freedom no longer exists, the estate-bumping effects of termination rights will soon be at hand. As a result, copyright authors will either be severely limited in creating efficient and effective estate plans or will unknowingly execute estate planning instruments that may be subject to the nullifying effects of estate-bumping. Either result is unacceptable.

The copyright code can be minimally revised to reconcile the conflict between copyright law and estates law, while furthering the rationales for termination rights and testamentary freedom. The theory behind termination rights and the theory behind testamentary freedom are not naturally at odds- both have the goal of maximizing the value of property. Termination rights are intended to grant authors a second chance to profit from their works after an original transfer of copyright. In essence, the goal is to increase the profitability from copyrights, not limit donative transfers. The problem is that termination rights, with their corresponding statutory class of successor heirs, cast too large a net. The provisions are drafted so broadly that termination rights apply to all transfers, whether for the author's profit or not.

The copyright code can be amended to decrease the conflict between copyright law and testamentary freedom in two ways, both having the same effect. This can be accomplished without undermining the reasons for creating reversionary rights for authors in the first place. First, the copyright act provision which already specifically extinguishes termination rights (of the statutory heirs) for copyrights transferred by Will could be expanded to extinguish termination rights for transfers of copyrights by any other Will-substitutes, testamentary substitutes, or donative transfers. Second, the copyright act could be amended so that the statutory heirs can only exercise termination rights regarding copyrights transferred for profit or for bona-fide business purposes. Either amendment preserves the basic copyright principle that authors should have a second chance to profit from their works. These amendments focus on reversionary rights after an author's death; the amendments will respect more fully the author's testamentary freedom. Absent such amendments, the current copyright act will soon herald a new era of estate-bumping that unwittingly frustrates and diminishes the liberty interests of copyright authors.

You Can't Choose Your Parents

Carissa R Trast has published her Note, You Can't Choose Your Parents: Why Children Raised By Same-Sex Couples Are Entitled to Inheritance Rights From Both Their Parents, in 35 Hofstra L. Rev. 857 (2006).

Here is her conclusion:

Children raised by parents of the same sex are entitled to the same inheritance rights to which children raised by heterosexual parents are entitled. But because these children lack the two bloodlines from which most children inherit, they cannot prove parental relationships with science and genetics. If there has also been no formal adoption due to illegality or neglect by the parents, the states need to find alternative ways for these children to receive the rights to which they are entitled.

Because intestacy laws are designed to reflect the intention of the decedent, a homosexual parent who has loved, reared and supported a child since the child's conception or arrival into the family would presumably intend such a child to recover from his or her estate. Therefore, the states need to adapt to this changing reality by fashioning elements of proof that same-sex parents and their children can meet. Allowing states to draft their own legislation guided by a broad set of possibilities leaves the power in each individual state-- where it belongs--to determine the best and most efficient way to administer distribution of estates while protecting the constitutional rights of the children involved.

Children of same-sex parents are analogous to children born out-of-wedlock for equal protection purposes, and under an intermediate scrutiny standard of review, most current statutes are unconstitutional. The statutes do not allow children of same-sex parents to recover from the estate of a parent who has not been established as a legal parent, and this leaves such children at an unfair disadvantage in terms of both financial and emotional support. Therefore, while the legislature provides the most efficient and effective method of addressing the needs of these children and adapting to the changes in society, if the states refuse to take action, then the courts must intervene and declare unconstitutional the existing statutes.

Children have no control over the way they are raised, or who raises them. To punish them because society may disapprove of the choices their parents have made is both ineffective and unjust. Accordingly, to meet the constitutional needs of these children, their rights to inheritance must be both recognized and remedied. Children of same-sex parents are entitled to the same recovery from both parents as children of opposite-sex parents. Therefore, children of same-sex parents should receive inheritance rights from both parents, legally recognized or otherwise.

Why Florida Needs a Divorce Revocation Statute for Beneficiary-Designated Nonprobate Assets

Suzanne Soliman has published her student article, A Fair Presumption: Why Florida Needs a Divorce Revocation Statute for Beneficiary-Designated Nonprobate Assets, in 36 Stetson L. Rev. 397 (2007).

Like many Americans, Floridians invest significantly in beneficiary-designated nonprobate estate planning tools such as life insurance. These types of assets comprise the bulk of many Floridians' estate plans because they are easy to obtain and, in many instances, affordable compared to other estate planning tools. It is important to effectuate the policyholder's intent, particularly because so many families trust that these assets will provide some degree of security. Enacting a divorce revocation statute to protect nonprobate assets will provide protection and security for many Florida families.

Dependent Relative Revocation - Returning it to its Roots

Frank L Schiavo (Associate Professor of Law, Barry University Dwayne O. Andreas School of Law) has published his article, Dependent Relative Revocation Has Gone Astray: It Should Return to its Roots, in 13 Widener L. Rev. 73 (2006).

Here is the conclusion:

The term DRR has been around for more than two hundred years and there is probably no inclination to restrict its use. Courts will probably not ever take Professor Warren's advice to do away with the appellation. And perhaps, courts will continue to expand the doctrine resulting in more confusion. The Restatement (Third) of Property ' 4.3 (1998) renames DRR the Doctrine of Ineffective Revocation, but note that it is revocation that is still emphasized. Perhaps a better appellation would be the Doctrine of Retroactive Revival, since it can be seen from the Flow Chart that the most important decision is whether the first will can be revived, not whether its revocation can be rescinded. Hopefully, the Flow Chart will aid in the proper analysis of the issues and limit the doctrine's applicability to the proper situation.

Family Harmony in Estate Planning

Timothy P O'Sullivan (Partner, Foulston Siefkin LLP - Wichita, Kansas) has published his article, Family Harmony: An All Too Frequent Casualty of the Estate Planning Process, in 8 Marq. Elder's Advisor 253 (2007).

Here is the conclusion:

Notwithstanding the high priority most clients place on maintaining family harmony in the estate planning process, estate planning attorneys for the most part have directed their attention primarily on other more technical issues relating to the management and disposition of property and the minimization of taxes and administrative costs. In so doing, they have inadvertently been incorporating a potential legacy of family discord in their client's estate plans, frequently resulting in fractious family disagreements following the disability or death of a parent, substantial legal and related costs being incurred in resolving various contentious administrative issues related thereto, and skewed distributions among the beneficiaries of their client's estates and trusts.

Nothing less than a sea change in the traditional approaches to the estate planning process appears to be warranted. Estate planning legal counsel should embrace a more holistic approach to their practice, emphasizing “preventive legal medicine” regarding family harmony issues in the same way a proactive stance regarding individual health has evolved in the medical field. It is thus incumbent that estate planning attorneys adequately inform clients of the impact various estate planning strategies and decisions can have on family harmony. It is equally important for them to include carefully crafted provisions in testamentary instruments which both anticipate and obviate frequently occurring disharmonious family circumstances that can erode the value of the estate or trust and severely damage the integrity of the estate plan. In the author's opinion, such redirected focus would eliminate most of the disharmonious family situations which are a frequent occurrence in the administration of the estate or trust of a disabled or deceased parent and when children are advised in inappropriate circumstances of their parents' assets or aspects of their estate plans.

Accommodating such a major shift in the traditional estate planning paradigm will no doubt pose a challenge to both the efforts and the professional objectivity of estate planning attorneys. The structure and substantive provisions of many testamentary instruments will need to be appropriately revised. Properly advising clients of strategies enhancing family harmony will require much more than a nominal time investment and may disabuse clients of preconceptions which would have otherwise favored a greater compensatory role for legal counsel in the operational phases of the estate plan following the client's disability or death.

Nonetheless, in the author's experience, attorneys who do so will enhance their professional reputation and derive personal gratification in having furthered this normally penultimate client objective. Their clients in turn are likely to be highly appreciative of their professional objectivity and have a much greater level of satisfaction with the entire estate planning experience.

The Case For a Uniform Bodily Remains Law

Tracie M Kester has published her Note, Uniform Acts--Can the Dead Hand Control the Dead Body? The Case For a Uniform Bodily Remains Law, in 29 W. New Eng. L. Rev. 571 (2007).  This Note was the winner of the 2006 William J. Pierce Writing Contest, which was sponsored by the National Conference of Commissioners on Uniform State Laws.

Here is her introduction:

Did former Red Sox slugger Ted Williams really want to be decapitated and cryonically frozen so that his bodily remains would spend eternity encapsulated in a building in the Arizona desert, much like items in a warehouse?  Although his will stated that he wanted to be cremated, and that his remains should be scattered in the ocean off of Florida, two of the great baseball player's children maintained that he had signed a document agreeing to cryonic freezing of his remains. The document, however, is no more than a small, stained piece of paper, signed by Ted, his son John Henry, and his daughter Claudia, stating that they “agree to be put into bio-stasis” after they die, so that they may “be together in the future, even if it is only a chance.” The signatures are not witnessed; however, a “family attorney” claimed it was signed while Ted was in the hospital prior to surgery.

Baseball fans were outraged when they discovered what had happened to the Hall of Famer's bodily remains. A website is devoted to the cause of having Ted's body defrosted and cremated, as directed in his will. The broader problem is how this situation ever occurred. That is, many legal practitioners would think that a decedent's cremation directive, when set forth in a will, would be upheld and only revocable by a later document executed with testamentary formalities.  As this Note will show, however, a review of actual cases suggests otherwise.

The case involving Ted Williams's bodily remains is one of many situations evidencing the need for more direction from legislatures for both citizens and the courts as to the best way an individual may go about directing the disposition of his body. Many states have been unclear with respect to who has the right to make decisions regarding the disposition of a person's bodily remains. Furthermore, even in those states with statutes that do provide a mechanism allowing individuals to direct what will happen post-mortem, the laws are not always clear or complete and can vary substantially from state to state. Moreover, because the law is not well-settled, many courts allow evidence beyond what would normally be acceptable in an attempt to interpret a deceased's wishes. This sends a message to those who are concerned about their bodily remains that there is almost no way to ensure a disposition according to their wishes.

The first Part of this Note discusses the evolution of the common law in the United States with respect to the disposition of bodily remains, as well as those statutes that have codified the common law. The second Part of this Note outlines problems with the common law and those statutes that codify the common law without any further clarification. This Part also suggests that state legislatures should enact bodily remains statutes that go beyond the common law. The second Part also shows the differences among the various state statutes that have been enacted, and posit that a uniform law is needed to resolve these differences. The final Part of this Note discusses the considerations involved in drafting a uniform law and proposes a sample uniform disposition of bodily remains act.

Pro se executors--unauthorized practice of law, or not?

Michael Hatfield (Associate Professor of Law, Texas Tech University School of Law) has published his article, Pro se Executors--Unauthorized Practice of Law, or Not?, in 59 Baylor L. Rev. 329 (2007).

Here is the conclusion:

Executors have the right to proceed pro se to probate a will and otherwise administer the estate. However, given the inherent uncertainties of estate administration and the executor's fiduciary duties to the beneficiaries, it is likely unwise for most executors to do so. Nevertheless, the probate courts should consider how best to accommodate pro se executors in a way that maximizes judicial access without decreasing judicial efficiency. Since, by definition, Texas attorneys will not be advising pro se executors, we should consider advising our testator clients as to the risks and potential benefits of pro se probate and ensuring that the testator's balancing of those risks and benefits is reflected in the will governing the executor.

Subsidized, Mandatory Long-Term Care Insurance

Lawrence A Frolik (Professor of Law, University of Pittsburgh School of Law)spoke at the Notre Dame Journal of Law, Ethics & Public Policy symposium entitled “Long-Term Care for America's Elderly: Who Is Responsible, and How Will It Be Achieved?”. His remarks have been edited for publication in An Essay on the Need for Subsidized, Mandatory Long-Term Care Insurance, 21 Notre Dame J.L. Ethics & Pub. Pol'y 517 (2007).

Here are the concluding paragraphs:

The advantages of mandatory long-term care insurance are obvious. It would create a pool of funds from which to pay for much of the future long-term care costs. It would create national savings to meet a national expense. How much it would pay for each individual would depend upon the amount of the benefits, and that in turn would depend upon how high were the premiums. The rich, the middle class, and the poor would all benefit. The rich, who might be able to pay for their long-term care, would receive benefits that would increase the size of their estates or permit them to purchase better care. The middle class would be better able to preserve assets for their heirs and provide for a more comfortable life for a community spouse. In contrast to Medicaid, which only pays for nursing homes, mandated long-term care insurance benefits would also pay for assisted living and possibly home health care, thus providing the poor with funds to purchase long-term care in a variety of settings, and often at a lower price. And if the premiums of those with limited income were subsidized, they would have received even greater  value from the insurance. Those of any economic class, who died after only modest or even no long-term care expenses, would have received the value of the insurance coverage in the same way that fire insurance has value even if the house never has a fire. In short, all economic segments of society would benefit from mandatory long-term care insurance.

The costs of long-term care must be borne by someone. Why not by all of us through an insurance arrangement? By collective action, we can meet the need of the individual to pay for long-term care and thus reduce by a bit our being “exposed to every risk and hardship.”

Holistic Approach to Estate Planning

Melissa Street has published her comment, A holistic approach to estate planning: paramount in protecting your family, your wealth, and your legacy in 7 Pepp. Disp. Resol. L.J. 141 (2007).

Here is the conclusion:

“Discourage Litigation; Persuade Your Neighbors to Compromise Whenever You Can; Point Out to Them how the Nominal Winner is Often a Real Loser - in Fees, Expenses, and Waste of Time” Abraham Lincoln was perhaps one of the earliest advocates of mediation when he wrote those lines. When testators are planning for their deaths, the words of Abraham Lincoln should ring loud. The first concern of testators is the happiness of their loved ones. Unfortunately, however much testators may love someone, they may not know how to transfer their wealth in a means that will prevent conflicts. As a consequence, instead of making someone's life better, testators instead create grief for their loved ones, such as an estranged relationship with a sibling, feelings of being unloved by the testator, and legal fees from years of litigation. When testators imagine their death, they typically think of how their loved ones will remember them. The last thing testators want to imagine is their family members cursing their name long after they are gone. Holistic estate planning employs the techniques of mediation to ensure that testators are successful in passing on a positive legacy that will last for generations. A family business, divorce and remarriage, an adult child as trustee, and large real estate holdings are areas in which testators are at particular risk if they do not share their estate plans with their families and consider conflicting views. There are a few options available to testators who want to keep their family out of court; namely, mediation of probate matters, mediation provisions in the will, ante-mortem probate statutes, and revocable living trusts. Unfortunately, all these fall short in some way or another. Holistic estate planning alone is paramount in protecting your family, your wealth, and your legacy.

The Case Against Holographic Wills

Richard Lewis Brown (Professor of Law, University of Nevada, Las Vegas)has published The Holograph Problem--The Case Against Holographic Wills, in 74 Tenn. L. Rev. 93 (2006).

Here is the introduction:

Holographic wills are a problem on several different levels. They are a problem to the coherence of the law of wills, to the decedents who have relied on them to guide the distribution of their estates, and to the court systems that must grapple with their chronic issues of validity and interpretation. This Article details the failings of holographic wills and argues that they should be excised from the law of wills.

Holographic wills are entirely or largely in the handwriting of the decedent. Yet the term “holographic will” is not simply descriptive of the form of the will or whether it is handwritten, typed, or printed. Rather, it is a term of considerable legal significance. In just over half of the states,  a will that qualifies as a holographic will can be admitted to probate without attestation.   As a result, statutes that authorize holographic wills create an exception to the nearly universal rule that a valid will must be witnessed.  Holographic will statutes are not simply anachronisms fading quietly out of favor. In fact, over the last half-century, there has been a modest increase in the number of states authorizing holographic wills.  In these states, a motley parade of home crafted documents have been admitted to probate, ranging from hand completed pre-printed will forms,  to excerpts from the most casual of letters,  to a handwritten note on the back of a receipt, to informal notes,  to eight handwritten words on the back of a greeting card,  to a handwritten marriage contract.  More troubling, similarly artless instruments that almost certainly were intended by their creators to be valid wills have been denied probate.

Why do many states authorize the creation of such problematic wills? The announced purpose is to allow for the creation of valid wills by those who are unable or unwilling to obtain the professional assistance of a lawyer.  But in doing so, holographic will statutes have constituted a legislative invitation to create homemade wills. Therein lies the fundamental problem with holographic wills; they are invariably homemade, either in whole-as in the common case of a totally handwritten will, letter, or memorandum that is submitted for probate as a holographic will-or in part-as in the common case of handwritten entries on pre-printed will forms. Because they are invariably homemade, holographic wills present a range of chronic and unnecessary problems.

Part II of this Article places holographic wills in the context of the broader law of wills, including a brief discussion of the goals of the law of wills, the functions of the required formalities of execution, and the evolving movement toward “deformalizing” the law of wills. This is most notably evidenced by the development of the substantial compliance doctrine and the dispensing power. Part III outlines and provides examples of significant problems inherent in holographic wills, including their susceptibility to invalidationand frequent issues of interpretation. Part IV focuses on the central weakness of holographic wills-the fact that they are invariably homemade, drafted by amateurs without professional advice, and executed without any formalities. Part IV, further argues that by encouraging the creation of such problematic testamentary instruments, statutes that authorize holographic wills undermine the ability of testators to effectuate their testamentary intentions. Finally, Part V makes three proposals: First, that statutes authorizing holographic wills be repealed; second, that states avoid the unnecessary invalidation of imperfectly executed wills-including handwritten, un-witnessed wills that are unlikely to be completely eradicated by the repeal of holographic will statutes-by adopting the substantial compliance doctrine or the dispensing power; and, third, that state legislatures and the practicing bar provide more satisfactory mechanisms than holographic wills for lawyer-resistant testators who currently use holographic wills.

Inherited IRA not protected from Creditors

In his recent article for the May 2007 RPPT, Jim Roberts (Glast, Phillips & Murray, P.C., Dallas, Texas) has written Inherited IRA Not Protected From Creditors.  Here are the opening paragraphs:

Federal law provides protection for most qualified plans, including 401(k), pension and profit sharing plans.But protections for Individual Retirement Accounts (“IRAs”) are a matter of state law. Most, if not all, states provide that IRAs are exempt. But there is a growing body of case law questioning the exemption of inherited IRAs.

A recent case highlights this growing trend. In Re: Russell Jarboe d/b/a RJ’s Brokerage & Plants 1(cite) was a case out of the United States Bankruptcy Court for the Southern District of Texas, Houston Division. It interpreted Texas law and, in particular, § 42.0021 of the Texas Property Code. In general, subsection (a) of that provision exempted from seizure by creditors those assets, whether vested or not, in “any stock bonus, pension, profit sharing, or similar plan, including a retirement plan for self-employed individuals, and under any annuity or similar contract purchased with assets distributed from that type of plan, and under any retirement annuity or account described in Section 403(b) or Section 408A of the Internal Revenue Code of 1986, and under any Individual Retirement Account or any Individual Retirement Annuity, including a simplified employee pension plan, and under any health savings account described in Section 223 of the Internal Revenue Code of 1986, is exempt from attachment, execution, and seizure for the satisfaction of debts unless the plan, contract or account does not qualify under the applicable provisions of the Internal Revenue Code of 1986.”