Wills, Trusts & Estates Prof Blog

Estate Planning Correlation to Wealth Distribution in America

In his article Where Do You Stand on America's Wealth Spectrum?, finance.yahoo.com, Nov. 1, 2007, Lee Eisenberg discusses the statistics of wealth distribution in the United States based on a national survey conducted by the Federal Reserve Board. He also describes various estate planning resources available to people in different wealth categories. Eisenberg analogizes financial success to a garage parking ramp, with the top of the ramp being the highest income and net worth. Below are excerpts from his article:

Wall Street firms told their brokers they would no longer receive commissions on accounts holding less than $50,000.*** The greater the household assets, the more fees and transaction costs can be extracted from an account.***

The biggest and broadest affluent segment consists of people with investable assets of between $200,000 and $1 million to $2 million. This group is sometimes referred to as mass affluent[.]***[I]f you have, say, $300,000 in your accounts -- you're definitely of prime interest to the brokers and customer reps at Merrill Lynch, Smith Barney, Vanguard and the rest. But they need to be careful lest you cost them money.***

To assign a real live broker (oops, financial consultant) to a client who keeps too low a Number is tantamount to Safeway assigning a personal shopper to anyone who comes in to buy a quart of milk.***

The next segment up from mass affluent is where the action gets white hot. This parking level belongs to those designated as high net worth individuals (or NWIs).***Generally, HNWIs have invested assets of at least $1 million[.]***

If you've made it onto the top levels of the ramp -- say you have at least $5 million in investments -- you are deemed to be an ultra high net worth individual (or UHNWI).*** The Boston Consulting Group reports that 3,000 new households a year lay claim to $20 million or more in invested assets.***

There is yet one more place to park, higher up and more exclusive still. This spot is for people for whom even discreet, private banking is déclassé. On this level of the ramp you forgo the wealth managers at even the toniest trust companies and rely instead on your own "family office," complete with its own in-house investment manager and staff.

Typically, families with family offices have $100 million, $500 million, $1 billion[.]*** At present, there are approximately 5,000 family offices around the country.*** People with only 20 million Numbers have begun to band together to create, in effect, multifamily offices to oversee their investments and estate planning.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

IRC § 409A Deferred Compensation Rules and Approaching Deadlines

Richard L. Alpern, (Consultant, Frederic W. Cook & Co., Inc.) has recently published his article entitled Ten Items Estate Planners and Tax Advisers Need to Know About Code §409A Deferred Compensation Rules, Prob. & Prop., Nov./Dec. 2007, at 32.

Here is the introduction to his article:

Section 409A of the Internal Revenue Code (“Code”) became effective on January 1, 2005. Because of transition relief and postponements of the deadline for adopting amendments, many companies, executives, and their advisers have not paid full attention to its effects and requirements. The final regulations issued in April 2007 provide that the transition relief ends on December 31, 2007. The amendment deadline had been extended until December 31, 2008, under IRS guidance issued on September, 10, 2007, provided that a time and form of payment that comply with Code §409A are specified in writing before January 1, 2008.

With the amendment and full compliance deadlines almost here, it is very important to have a basic understanding of the lengthy and complex Code §409A rules and what needs to be done by the end of 2007. This article discusses ten key items that estate planners and tax advisers should know about the Code § 409A rules.

Examining receipt and release agreements in trusts – How to use this technique successfully

Robert Whitman, (Professor of Law, University of Connecticut School of Law) has recently published his article entitled Sorting Out Receipts and Releases, 33 ACTEC J. 142 (2007).

Here is an excerpt from the introduction to his article:

At the conclusion of trust administration, or at any earlier time that the fiduciary plans to make significant distributions of funds to beneficiaries, the fiduciary may wish to obtain from each beneficiary a receipt and release agreement. In this article that agreement is referred to as the “R and R.” Reference in this article to the fiduciary is also meant to include those who may assist her, such as her attorney, accountant, or financial planner. * * *

To help the fiduciary avoid creating beneficiary concerns, early discussions about the R and R are strongly suggested. Ordinarily, at the time of the submission of the R and R to a beneficiary or the beneficiary group, the fiduciary will usually also be providing the beneficiary with some form of a fiduciary accounting. If the fiduciary accounting is clear, understandable, and easily read, and if from the start of administration it was explained to the beneficiary group that the R and R would be sought prior to distribution, there is likely to be less chance of a beneficiary having undue concerns. * * *

The purpose of this article is to provide fiduciaries and their lawyers with information about the general requirements and proper procedures for drafting the R and R, to suggest tactics to be used to avoid damaging the relationship with beneficiaries when seeking the R and R, and to suggest approaches for fiduciaries to maximize the benefits of the R and R for both parties. Three distinct approaches to drafting the R and R are considered below, and forms of R and Rs for each approach are provided as examples that can be adapted for use.

New Investment Trend Bridges the Gap Between Socially Responsible and Mainstream Investors

Many “socially responsible” as well as some mainstream investment companies have begun to consider environmental, social and governance (ESG) factors when investing their clients’ assets.

Carolyn Cui, For Money Managers, A Smarter Approach To Social Responsibility, WSJ.com, Nov. 5, 2007, explains:

Investment managers and analysts are developing formulas that take into account such issues as executive pay, carbon emissions and workplace gender diversity, along with traditional financial fundamentals. The logic: Companies that think creatively about how these issues affect the bottom line are likely to have an edge over rivals that don't.***

The trend is starting to have an impact on pension plans, mutual funds, exchange-traded funds and other products for individual investors as well. * * *

For now, much of the interest in the ESG approach to investing seems driven by environmental concerns. A slew of so-called green funds that invest in alternative energy, clean technology or water resources have sprung up in the past few years. PowerShares Capital Management LLC, for example, started WilderHill Clean Energy ETF in March 2005, and the fund has since ballooned to $1.28 billion. Through last week, the WilderHill ETF was up more than 40% for 2007, vastly outpacing the broader market. * * *

Oil giants, power plants, mining companies and steelmakers get blamed for contributing to global warming. The business risk is that they will face taxes or penalties as legislators around the world increase their efforts to reduce pollution. For instance, as of January 2009, New York and nine other Northeastern states will start a program to cap and trade carbon-dioxide emissions. * * *

[S]keptics remain as to whether a broad ESG approach to investing actually works. Some say the new approach still shares too much ground with the traditional world of socially responsible investments -- the blanket ban on sin stocks -- and these funds historically have tended to trail the broader market, as the additional screening process narrows down the selection pool and increases research costs. * * *

Critics of the ESG approach cite a scarcity of corporate information on nonfinancial issues such as human rights, and a lack of methods for quantifying such matters. * * *

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

The Laptop Debate Continues

The controversy regarding permitting students to use laptop computers during class continues to grow.  On one hand, some professors claim that students become "court reporters" and use their computers for non-class related activities.  These professors seek their students' rapt attention.  On the other hand, some professors argue that laptops allow students to take faster notes, giving them more time to think, and that laptops facilitate the quick retrieval of material important to class discussion.

For a review of the growing battle, see Jill Schachner Chanen, Profs Kibosh Students’ Laptops, ABA J. Law News Now, Nov. 2007.

Texas Probate Lawyer Sanctioned for Misconduct

On September 13, 2007, a Texas lawyer was sanctioned for various acts of misconduct which occurred while he represented the executor of a decedent's estate.  See Disciplinary Actions, 70 Tex. B.J. 890, 892 (2007) which explains that this Dallas lawyer:

accepted a five-year, partially probated suspension effective Nov. 1, 2007, with the first two years actively served and the remainder probated. A panel of the District 6-A Grievance Committee found that [he] represented the independent executor of an estate. [He] failed to promptly distribute the assets of the estate to the beneficiaries. [H]e further failed to promptly pay a claim on the estate, misrepresenting to the attorney for the claimant that all assets of the estate had already been distributed to the beneficiaries.

Larry King Sues Insurance Company for Breach of Fiduciary Duty

On October 22, 2007, CNN host Larry King filed a complaint against Meltzer Group insurance company, alleging breach of fiduciary duty and detriment to his financial interests.

King charges that an insurance company convinced him to engage in a series of "highly complex life insurance transactions" that resulted in the CNN host's purchase and flipping of insurance policies with an aggregate value of $15 million.

In one instance cited in the lawsuit, King purchased a $10 million policy and, at Meltzer's direction, immediately sold it for a $550,000 profit. * * *

The newsman alleges that Meltzer, driven by "greed and avarice," steered him into deals that were against his financial interests, and that the insurance broker never considered his financial condition, health, and the "likelihood of his future uninsurability." * * *

King's lawsuit, which does not specify monetary damages, charges Meltzer and its principal, Alan Meltzer, with breach of fiduciary duty.

See Larry King Rooked In Life Insurance Scam?, thesmokinggun.com, Nov. 2, 2007.

Qualified Severance and the Generation-Skipping Transfer Tax

Jerold I. Horn (attorney, Peoria, Illinois) has recently published his article entitled Availability of a Qualified Severance (i) If the Severance Changes Beneficial Interests or Otherwise Coincides with Changes in Beneficial Interests and (ii) If Remainder Dispositions Are Outright, 33 ACTEC J. 94 (2007).

Here is the introduction to his article:

The primary focus of this article is whether a qualified severance is available for a trust in which beneficial interests, present or future, are subject to change because of the death of a beneficiary, the termination of a term of time, the mandate of the governing instrument, the making of a severance, the availability or nonavailability of a qualified severance, the exercise of a nongeneral power of appointment, the exercise of a power of a trustee to “decant,” or the exercise of a power of an independent trustee to grant or revoke a general power of appointment. The situations that are described in the preceding sentence are common. Whether a qualified severance is available in each of these situations will have a large impact upon the extent, if any, to which reliance upon a qualified severance of a single trust that has an inclusion ratio of more than zero and less than one is a viable alternative to the mandated creation, from the outset, of two trusts, one with an inclusion ratio of zero and the other with an inclusion ratio of one.

LifeSharers Membership Now Exceeds 10,000

According to LifeSharers, LifeSharers Recruits 10,000th Organ Donor, Nov. 8, 2007, the organ donation network has attracted its 10,000th member.

As this article explains:

LifeSharers offers registered organ donors preferred access to donated organs.

LifeSharers members agree to donate their organs upon their death. They also agree to offer their organs first to other LifeSharers members, if any member is a suitable match, before offering them to non-members. In exchange, they get preferred access to the organs of other LifeSharers members. So, people who join LifeSharers increase their chances of getting a transplant should they ever need one.

"LifeSharers membership is a compelling investment in your future. It's free, and it could literally save your life,” says Bill Staton, Chairman of Staton Financial Advisors. “By joining LifeSharers you reduce the chance you'll die waiting if you ever need an organ transplant."

There are over 98,000 people on the transplant waiting list in the United States. More than half of them will die before they get a transplant. * * *

Only about 50% of adult Americans have agreed to donate their organs when they die, but just about 100% would agree to accept an organ transplant if they needed one to live. This is one of the biggest reasons there is such a large shortage of transplantable organs. * * *

LifeSharers membership is free and open to all at http://www.lifesharers.org or by calling 1-888-ORGAN88. There is no age limit, and parents can enroll their minor children. No one is excluded due to any pre-existing medical condition.

Vast majority of parents lack wills

According to a Parents magazine poll reported in Sharon Jayson, Out of the mouths of ... parents, USA Today, Nov. 7, 2007, at 12D:

Fewer than one-quarter of parents (23%) have a will. * * *

A finding that didn't surprise Los Angeles attorney Jon Gallo was the small percentage who have wills.

"Younger people usually don't think in terms of death or disability, which is the reason for having a will. Naming a guardian and providing for their children — they don't think in those terms," says Gallo, who specializes in estate planning.

The most basic will could cost $200 to $500, but he says most people don't want to face their own mortality or don't know whom to entrust with their children.

Trustee's Duty to Inform Beneficiaries

Thomas P. Gallanis (Professor of Law, University of Minnesota) has recently posted on SSRN his article entitled The Trustee's Duty to Inform.  This article also appears in 85 N.C.L. Rev. 1595 (2007).

Here is the abstract of his article:

This Article examines an aspect of trust fiduciary law historically ignored in the law reviews: the trustee's duty to provide information to the trust's beneficiaries about the trust and its administration. The time is ripe for analysis, because the scope of the duty to inform provoked contentious debate during the drafting of the recently promulgated Uniform Trust Code (UTC), and all twenty of the enacting jurisdictions, including North Carolina, have substantially modified the UTC's provisions. Part I lays the descriptive foundation, explaining the requirements of the duty to inform under the UTC, under North Carolina's version of the UTC, and in the other nineteen enacting jurisdictions. Part II contains the normative analysis, addressing the central questions about the duty to inform: should trust law contain a duty to inform and, if so, should the duty be mandatory or should it be a mere default? To answer the first question, the Article draws on two interdisciplinary perspectives: legal history and law-and-economics. These perspectives reveal that the duty to inform has a distinguished pedigree within the history of Anglo-American law reaching back nearly two centuries, and that the duty performs a vital function today. Establishing the duty's normative basis, the Article then considers whether the duty should be mandatory at least in part, as in the UTC, or wholly default law, as in North Carolina. To answer this question, the Article enters into and extends the ongoing debate over whether trusts are primarily contracts or property arrangements. Rejecting the strong contractarian approach as inconsistent with the direction of the modern law of fiduciary administration and drawing attention to the beneficiaries' unique position and incentives to supervise and enforce the trustee's fiduciary obligations, the Article concludes that the beneficiaries must have the information needed to exercise their supervisory and enforcement powers, irrespective of the wishes of the settlor. The duty to inform can be default law at the margins but must maintain a mandatory core.

Who uses assisted suicide more -- the vulnerable or the elite?

The following excerpts are from Brittany Levine, Assisted-suicide study finds no bias against the vulnerable, USA Today, Oct. 17, 2007, at 9D:

Medical advocacy groups have long said the legalization of physician-assisted suicide is a slippery slope that could lead to the abuse of vulnerable groups.

But a study in the Journal of Medical Ethics finds no evidence to support that prediction.

The study examined data from Oregon, the only state that has legalized physician-assisted suicide, and the Netherlands, which has openly practiced it since the 1980s.

Researchers focused on such groups as the elderly, women, the uninsured in Oregon (the Netherlands has universal insurance), racial and ethnic minorities, the poor, the less educated, people with psychiatric illnesses, minors, the chronically ill and people with AIDS.

The question driving the research was whether such groups would be pressured or manipulated to request or accept assisted suicide by "overburdened family members, callous physicians, or institutions or insurers concerned about their own profits," according to the study.

The study finds that people with AIDS were the only group with heightened use of physician-assisted suicide. * * *

Overall, people who died with a doctor's help were more likely to be members of groups "enjoying comparative social, economic, educational, professional, and other privileges," the study says.

Common Law Trust is Not a Legal Person

Lionel Smith (Professor of Law, McGill University Faculty of Law) has recently posted on SSRN his article entitled Trust and Patrimony.

Here is an abstract of his article:

The French jurist Pierre Lepaulle argued that the common law trust could be best understood, in civilian terms, as a patrimony by appropriation. This argument has been influential in some civilian receptions of the trust. In fact, Lepaulle misunderstood the nature of the common law trust, which is founded on the obligations owed by the trustee in relation to the trust property. The rights of beneficiaries in the common law trust are neither purely personal rights against the trustee, nor are they real rights in the trust property, but rather they are rights over the rights which the trustee holds as trust property; they have a proprietary character since they persist against many third party transferees of the trust property. This analysis of the common law trust leads to the conclusion that it would be a fundamental change to turn the common law trust into a legal person. More generally, it is argued that any legal system that characterizes the trust as a legal person will find that it has ceased to understand the trust as a fundamental legal institution.

Living Will Humor

The following allegedly true story is from Jerry Buchmeyer, et cetera -- Let It Be, 70 Tex. B.J. 913 (2007):

This marvelous contribution is from Gene Majors of San Marcos (Majors Law Firm, P.L.L.C.), who writes, "Will signings are often somber occasions, but not this one." Gene was a witness at a will signing ceremony, where his daughter — partner Carrie Majors — was explaining the living will to the client, "an attractive, early fifties woman."

Carrie said, "If you are terminal and you don’t want to be on life support, initial here."

With her pen paused over the page, the client asked, "Can I stay on life support until I’m a size 8?"

IRS Denies Charitable Deduction to Attorney Who Donated Timothy McVeigh Files to University

Leslie Steven Jones was a court appointed attorney for Oklahoma City bomber Timothy McVeigh. As part of his representation of McVeigh, Jones acquired 171 boxes of documents, computer discs, audio and video cassettes and photographs. The federal government provided similar materials to various state and federal agencies. Jones donated the documents to the University of Texas at Austin.

Although the documents were not the originals and existed elsewhere, Jones’ appraiser, John R. Payne, determined the gift value to be $294,877; Payne used gifts of original documents as comparables in establishing this amount. However, the IRS denied Jones a charitable deduction stating that Jones did not own the documents. The court explained that because the documents were not attorney work product, they belonged to the client and not the attorney.

According to the Editor’s note following this article, the court was uncomfortable with the appraisal and with the consequences of attorneys gifting their client files to public institutions for personal gain.

See No Charitable Deduction for Attorney Gift of Timothy McVeigh Files, Washington Hotline, mcintire.giftlegacy.com, Nov. 2007, Week 1.

Special thanks to Russell R. Winer, Attorney at Law, for bringing this article to my attention.

Global Social Problems and Promising Charitable Solutions

Dr. William F. Schulz (Executive Director, Amnesty International USA) has recently published his comments which he presented as the The Joseph Trachtman Lecture, 33 ACTEC J. 137 (2007).

Here is an excerpt from his article:

Now when I speak of philanthropy, I do not mean the kind of traditional charity that we associate with organizations that flourished in Victorian England and went by such names as the The National Trust Society for the Ruptured Poor or The Queen’s Conglomerate of Wizened Widows Who Have Seen Better Days or my favorite, naturally, The National Society for Poor, Pious Clergymen Who Have Retired to the Country. Instead, I mean giving that is designed to attack the root causes of social problems and change the world in which we live, and remarkably enough, we are beginning to see evidence that such change may actually be on the horizon. We have all heard of the epiphany that struck Bill Gates a few years ago when he learned that half a million children in the developing world die every year from an entirely preventable disease, rotavirus, the most common cause of diarrhea, and he asked himself, “How could I not have heard of something that kills half a million children a year unnecessarily?” But it is not just the admirable examples being set by Bill Gates and Warren Buffett. It is the fact that the Carter Center and its donors have been able to practically eliminate river blindness. It is the fact that the number of donations to eleemosynary institutions of $100 million or more almost doubled from 2005 to 2006 and has grown from two in 1996 to 21 last year.

California may go forward with transfer on death deeds

In 2004, Assemblyman Chuck Devore introduced a bill that would allow Californians to transfer real property upon death without resorting to legal services and completely avoiding the probate process.  Assemblyman Devore introduced this bill after meeting with Mary Pat Toups, 79, a pro bono attorney and a grandmother. Toups has spent $30,000 of her own money attending hearings, lobbying officials, and even launching her own website - www.transfer-on-death-deeds.com to support the bill.

In 2004 the California Bar's Trusts and Estates Section persuaded the Assembly Judiciary Committee to downgrade this bill into a study bill. However in June, the Assembly approved AB 250 after adding explanatory language and consumer warnings on the back of the form.

If the legislation that Toups is pushing for prevails, a standardized, one-page form no longer than a tire-rebate mailer will be available on the Internet or from retail store.  * * *

All owners would have to do would be describe the property, list the beneficiaries and indicate whether they wanted a spouse or someone else to live there as an intermediary owner until their death. * * *

Probate lawyers and others remain unconvinced.

Southwestern Law School professor Ira Shafiroff, who believes the “overwhelming number" of wealthy people handle property disposition with customized living trusts, opposes the bill. He thinks the concept is anti-lawyer oversimplification.

"We're talking about real estate -- for most people, their most significant asset -- and to transfer this with a commercial form is asking for trouble," he said. "It's a complex area of the law. To [believe] that a TOD deed would take care of it is like trusting a lay person to perform an appendectomy." * * *

See Chip Jacobs, Crusader pushes for simpler inheritance rules, latimes.com, Nov. 4, 2007.

Note that at least eight states already have special provisions dealing with transfer on death deeds, also called beneficiary deeds (Arizona, Colorado, Kansas, Missouri, Nevada, New Mexico, Ohio, and Wisconsin).

In addition, the National Conference of Commissioners on Uniform State Laws is drafting a Uniform TOD for Real Property Act. 

Treasury Department Seeks to Clarify the GRAT Confusion in the Estate Tax Context

David A. Herpe and Jeanette Suarez Hunter (Attorneys at Law, McDermott Will & Emery LLP) have recently published their article entitled Proposed Regulations Clarify Includability of Grantor Retained Annuity Trust in Grantor’s Gross Estate, 33 ACTEC J. 131 (2007).

Here is the introduction to their article:

Estate planners have long wondered about the proper estate tax treatment of grantor retained annuity trusts (“GRATs”) when the grantor dies during the trust term. There has been concern—and often confusion— as to whether IRC § 2036 will cause the trust property to be included in the grantor’s gross estate or whether IRC § 2039 instead might apply, or both. Recently the Treasury Department published proposed regulations (the “Proposed Regulations”) that seek to clarify the confusion. Specifically, the Proposed Regulations incorporate the guidance provided in two revenue rulings related to IRC § 2036 treatment of charitable remainder trusts and provide a rule for determining when IRC § 2036 and IRC § 2039 will apply at a grantor’s death. The Proposed Regulations, however, give rise to some estate planning uncertainty.

Fairness Solution to the Estate Tax Quandary

Richard L. Dees (Attorney at Law, McDermott Will & Emery LLP) has recently posted on SSRN his article entitled Time Traveling to Strangle Strangi (and Kill the Monster Again), Part 3.

Here is the abstract of his article:

The author completes a three-part article by proposing the unification of the estate tax. In the first part of the article (Tax Notes, Aug. 13, 2007, p. 563, Doc 2007-16741, or 2007 TNT 157-32), the author criticized Strangi and other recent decisions including certain partnership interests in the deceased owner's estate using section 2036. Part 2 (Tax Notes, Aug. 20, 2007, p. 657, Doc 2007-16792, or 2007 TNT 162-29) proposed that Congress repeal section 2036 and the other estate tax strings sections and replace estate inclusion with an easy to complete gift rule that would be fairer and generate tax revenue. Part 3 spends some of that revenue by proposing that the computation of the federal estate tax be changed so that it is computed net of all death taxes.

The author advocates this change for three reasons: (1) the change would cut effective estate tax rates without changing the current 45 percent rate, (2) it would eliminate the unfairness of double death taxation, and (3) it would unify the transfer tax, meaning that the gift and estate taxes would be imposed in the same way. The author takes on common misunderstandings to justify this change, including explaining why in more than half the states, the federal estate tax rate has not been cut but it actually increased by 6 percent. He also argues that fairness should be the primary objective of an estate tax compromise and that any proposed estate tax change needs to be considered in light of its revenue cost.

The author concludes that increasing the estate exemption or providing multiple estate tax rates both fail this fairness-cost analysis. Instead of increasing the estate tax exemption for everyone, the author proposes benefits targeted to small business owners, farmers, and ranchers.

Ninth Circuit Bigelow Decision Leaves Issues Unresolved

Steve R. Akers (Managing Director, Bessemer Trust) has recently published his article entitled Bigelow v. Commissioner, RPPT eREPORT (2007).

Here is the synopsis of his article:

The Ninth Circuit now joins the Third, Fifth, and Eighth Circuits in weighing in on the application of §2036 to family limited partnerships. Bigelow v. Commissioner, 100 AFTR2d 2007-xxxx (9th Cir. September 14, 2007), affg, T.C. Memo 2005-65. The Ninth Circuit upheld the Tax Court finding that §2036 caused the inclusion of all partnership assets in the decedent’s gross estate without a discount. The Ninth Circuit decision is not surprising and generally does not plow new ground. The facts of an implied agreement for retained enjoyment of the assets contributed to the partnership are strong. The court focused on the lack of purported non-tax benefits to find that the bona fide sale for full consideration exception did not apply. The court seemed to be looking for actual particular claims or risks to support a liability protection purpose, an actual threat of a partition action to support avoiding partition as a purpose, and particular assets or a business requiring active management to support a management purpose. The court said that a heightened scrutiny analysis would apply, and the court said to consider whether the terms of the transaction differed from those of two unrelated parties negotiating at arm’s length (in effect, suggesting a “comparability” test to determine if unrelated parties would have contributed assets to the partnership in the same situation as the decedent.)

The opinion contains a startling “requirement” for the full consideration exception to §2036. The opinion literally says that there must be more than just transfers to the partnership for a proportional number of units of the partnership, and that there “must” be a “genuine pooling” of assets — which would seem to require significant contributions by other partners. However, the reasoning in the next several pages of the opinion refers to other factors (primarily the absence of non-tax benefits) in addressing the bona fide transfer for full consideration exception to §2036. In fact, there were no significant contributions by other partners in that case, but the court made no mention of that as a reason to refuse application of the full consideration exception. Planners probably will not drastically change their planning for family limited partnerships to urge strongly that clients have other family members make substantial contributions to the partnership in light of this troublesome statement in the opinion —which the court itself did not seem to apply.

Top SSRN Downloads

Here are the top downloads from September 6, 2007 to November 5, 2007 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	176	Agency Costs, Charitable Trusts, and Corporate Control: Evidence from Hershey's Kiss-Off Jonathan Klick, Robert H. Sitkoff, Florida State University College of Law, Harvard Law School, Date posted to database: August 31, 2007 Last Revised: October 23, 2007
2	79	Why Did Trust Law Become Statute Law in the United States? John H. Langbein, Yale University - Law School, Date posted to database: September 12, 2007 Last Revised: October 22, 2007
3	51	Estate Tax Exemption Portability: What Should the IRS Do? And What Should Planners Do in the Interim? Mitchell Gans, Hofstra University - School of Law, Date posted to database: September 11, 2007 Last Revised: September 26, 2007
4	48	Leaving More than Money: Mediation Clauses in Estate Planning Documents Lela P. Love, Stewart E. Sterk, Yeshiva University - Cardozo School of Law, Yeshiva University - Cardozo Law School, Date posted to database: September 25, 2007 Last Revised: September 25, 2007
5	44	Introducing the Law of Nonprofit Organizations and Philanthropy David A. Brennen, University of Georgia School of Law, Date posted to database: October 3, 2007 Last Revised: October 26, 2007
6	41	The Uniform Acts' Loophole in Fraudulent Conveyance Law Adam J. Hirsch, Florida State University College of Law, Date posted to database: September 15, 2007 Last Revised: November 5, 2007
7	35	The Section 67 Question: Are Fees for Investment Advice Fully or Partially Deductible by Trusts? James Loebl, Valparaiso University - School of Law, Date posted to database: October 16, 2007 Last Revised: October 27, 2007
8	32	When Informal Adoption Meets Intestate Succession: The Cultural Myopia of the Equitable Adoption Doctrine Michael J. Higdon, University of Nevada, Las Vegas, Date posted to database: August 28, 2007 Last Revised: August 28, 2007
9	31	Designating Health Care Decision-Makers for Patients Without Advance Directives: A Psychological Critique Nina A. Kohn, Jeremy A. Blumenthal, Syracuse University - College of Law, Syracuse University - College of Law, Date posted to database: August 31, 2007 Last Revised: September 25, 2007
10	28	Tax Losses Lester B. Snyder, University of San Diego School of Law, Date posted to database: October 3, 2007 Last Revised: November 1, 2007

Pros and Cons of stranger-owned life insurance, a.k.a. disposable policies

Alan Jensen (Attorney at Law, Holland & Knight LLP) and Stephan R. Leimberg (Lecturer-in-Law, Masters of Taxation Program of Villanova University School of Law; CEO, Leimberg Information Services, Inc.) have recently published their article entitled Stranger-Owned Life Insurance: A Point/Counterpoint Discussion, 33 ACTEC J. 110 (2007).

Here is the abstract of their article:

Our area of law, once so calm, seems to be giving rise to more and more controversy. The fate of the transfer tax system has been bouncing around for the last 10 years or so. Enterprising (or scheming, depending upon your perspective) practitioners are taking what everyone thought were standard planning techniques, adding little twists, and trying to obtain patents for them. And, in the insurance area, what began as a fairly innocuous innovation, viatical settlements, has bloomed into a new and very controversial cottage industry: the acquisition of insurance by an insured for the purpose of selling that policy to a third party.

This new technique, which differs from viatical or life settlements in that those older techniques involved acquiring a preexisting policy from an insured who no longer needed it, goes by many different names. This article will adopt both the somewhat pejorative term stranger-owned life insurance (or “SOLI”) and the more friendly term “disposable policies.” Each term refers not to a type of insurance product, but rather a technique for purchasing insurance in which an unrelated third party offers to loan to an insured the premium amounts for a policy on the insured’s life at a fairly high interest rate and the insured has the option to sell that policy back to the third party at the end of two years. However, as the discussion that follows will show, even this brief summary of the technique is subject to interpretation.

This article will present both sides of the debate. Alan Jensen will present the arguments in favor of SOLI and Stephan Leimberg will present the opposing arguments. Each will also be permitted space to present a rebuttal of the other’s position. Let the fun begin!

The Roski Decision and the Propriety of Governmental Action

Wendy C. Gerzog  (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled An Attempt to Legislate?

Here is the abstract of her article:

The Tax Court held in Roski that the government's imposition of certain pre-requisites for closely held businesses and farms to seek estate tax relief was an attempt by it to legislate. Was it? Within the context of closing the tax gap, it may not be.