Wills, Trusts & Estates Prof Blog

Estate Planning from Fresh Perspectives

The following is from a slide show posted on NYTimes.com, entitled Inheritance Reconsidered, discussing various estate planning strategies chosen by affluent individuals:

With the largest intergenerational transfer of wealth in American history now under way, Martin Rothenberg and others are reconsidering the meaning of inheritance. ***

Fearing complacency, Dal LaMagna, founder of the Tweezerman company, set up trusts to provide only small incomes for his children. "If you give them more, it's counterproductive to their motivation," he said.***

Frank Butler, a retired chief executive, wanted to give his fortune to charity. His wife, Ruth, however, wanted to subsidize the education of their three grandchildren. So they divided their resources in half, creating an educational trust from Mrs. Butler's side and a charitable foundation from Mr. Butler's[.]***

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

Deficit Reduction Act and State Administration of the Medicaid Program

Julia Belian (Visiting Associate Professor of Law, University of Missouri-Kansas City School of Law) has recently published her article entitled State Implementation of the Optional Provisions of the Deficit Reduction Act, 9 Marq. Elder's Advisor 63 (2007).

Here are excerpts from the conclusion to her article:

The Deficit Reduction Act is a complex piece of legislation that modifies an already complex federal law. It offers a myriad of complex options to states that were already operating widely divergent versions of the Medicaid program.***

Increasing health care costs force consumers to face difficult choices, and the government likewise feels the strain of rising costs. Whether Medicaid was “working” before the DRA became law is irrelevant because, regardless of the ability to get health care to those in need, the costs had reached the point of crippling state budgets. Post-DRA Medicaid is not inherently more complex than pre-DRA Medicaid. States can still choose to adopt different approaches to the various problems they face, all in the hopes of improving health care delivery and reducing health care costs. However, the new state options under the DRA do seem to change the landscape in key ways.***

DRA and long-term care for senior Americans with disabilities

Kim Dayton (Professor of Law, William Mitchell College of Law) has recently published her article entitled Reality Check: The DRA's Impact on Seniors with Disabilities and Their Caregivers, 9 Marq. Elder's Advisor 13 (2007).

Here is the conclusion to her article:

There is no question that this nation needs to look closely at the means by which long-term care for elders with disabilities-indeed, all heath care, for everyone-is financed. Many options for restructuring the financing of long-term care for the elderly are available-including adding a long-term care benefit to Medicare or following the leads of Japan and Germany in creating a separate social insurance program to provide long-term care for older Americans. These will require additional taxes and may involve some general cost-shifting back to consumers who use government-financed health care services. But such cost-shifting should impact everyone, not just the elderly and disabled.

The DRA's solution to a crisis (that at the moment is largely manufactured) entailing the shifting of additional burdens onto groups that already bear most of the tremendous economic and emotional burdens that long-term disabilities implicate should not be considered acceptable. Nor should taxpayers be forced to support the long-term care partnerships, which amount to government sponsored discrimination benefiting a small group of wealthy, non-disabled Americans. The asset-transfer and LTCP provisions of the DRA should be repealed while Congress seeks gender- and ability-neutral solutions to the nation's future financing of long-term care for the millions of seniors who will need it in the coming decades.

Disintermediation within the model of market evolution

J.W. Verret has recently published an article entitled Economics Makes Strange Bedfellows: Pensions, Trusts, and Hedge Funds in an Era of Financial Re-intermediation, 10 U. Pa. J. Bus. & Emp. L. 63 (2007).

Here is the introduction to this article:

In Strong Managers, Weak Owners, Professor Mark J. Roe articulates an expansive theory to explain the evolution of the fragmented market structure in the United States. He posits that political choices led to fragmentation in the American financial markets, thus guiding the evolution of the Berle-Means Corporation. His view is sometimes supplemental to, but often in contradiction with, conventional economic efficiency or functionalism arguments that are used to explain that evolution.

This Article examines Professor Roe's theory. It will use the political influences that Roe credits with fragmentation to understand current changes in market structure, including the growth of hedge funds, in general, as well as the advent of activist hedge funds that are re-shaping corporate governance. It will end by exploring some unique problems facing pensions and trusts that invest in hedge funds. The result will be a deeper understanding of the Disintermediation Thesis within the model of recent market evolution. This Article will also offer a policy prescription for government regulators that oversee the fiduciary intermediaries who invest in these new vehicles.

Research reveals rising life expectancy gap among different segments of population

The following is from Robert Pear, Gap in Life Expectancy Widens for the Nation, NYTimes.com, March 23, 2008:

New government research has found “large and growing” disparities in life expectancy for richer and poorer Americans, paralleling the growth of income inequality in the last two decades.***

The gaps have been increasing despite efforts by the federal government to reduce them. One of the top goals of “Healthy People 2010,” an official statement of national health objectives issued in 2000, is to “eliminate health disparities among different segments of the population,” including higher- and lower-income groups and people of different racial and ethnic background.***

While researchers do not agree on an explanation for the widening gap, they have suggested many reasons, including these:

Doctors can detect and treat many forms of cancer and heart disease because of advances in medical science and technology. People who are affluent and better educated are more likely to take advantage of these discoveries.***

Rector v. Commissioner Analyzed

Steve R. Akers (Bessemer Trust, Dallas, Texas) has recently published his article entitled Rector v. Commissioner, TC Memo 2007-367, RPPT eREPORT (Feb. 2008).

Here is a summary of his article as posted on RPPT eREPORT:

The Tax Court finds an implied agreement under §2036 and applies the section to the assets contributed to the FLP rather than to the gifts of LP interests under a “single plan” analysis.

Making Gifts to Heirs Now May Reduce Taxable Value

The following is from Brett Arends, Market Turmoil Creates Opening To Enrich Heirs, online.wsj.com, March 15, 2008:

It isn't all bad news. This winter's market turmoil is creating a golden opportunity to pass on stocks, mutual funds or other appreciating assets to your heirs.

Plunging stock prices mean you can give more of those assets under the gift-tax ceiling, while the collapse in long-term interest rates has suddenly widened a little-known tax loophole on certain estate-planning trusts.

Put the two together and you could save a bundle on taxes by making bequests right now, especially if you've got an estate in the millions.***

The bottom line is that making the gift this way can slash the taxable value, allowing you to pass more to your heirs.***

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

Testators’ Right to Compensate Caregiving Children Should Be Preserved

Joshua C. Tate (Assistant Professor, Southern Methodist University Dedman School of Law, Visiting Assistant Professor, University of Pennsylvania Law School) has recently posted on SSRN his article entitled Caregiving and the Case for Testamentary Freedom. 

Here is an abstract of his article:

Almost all U.S. states allow individuals to disinherit their descendants for any reason or no reason, but most of the world's legal systems currently do not. This Article contends that broad freedom of testation is defensible because it allows elderly people to reward family members who are caregivers. The Article explores the common-law origins of freedom of testation, which developed in the shadow of the medieval rule of primogeniture, a doctrine of no contemporary relevance. The growing problem of eldercare, however, offers a justification for the twenty-first century. Increases in life expectancy have led to a sharp rise in the number of older individuals who require long-term care, and some children and grandchildren are bearing more of the caregiving burden than others. Recent econometric studies, not yet taken into account in legal scholarship, suggest a tendency among the American elderly to bequeath more property to caregiving children. A competent testator, rather than a court or legislature, is in the best position to decide how much care each person has provided and to reward caregivers accordingly. Law reform, therefore, should focus on strengthening testamentary freedom while ensuring that caregivers are adequately compensated in cases of intestacy.

Joshua is interested in readers’ comments on his article. You can submit your comments by contacting Joshua by e-mail at jtate@law.upenn.edu.

Why people fake their death

In Missing Persons, published in the March 2008 issue of The Estate Analyst, Robert L. Moshman, Esq. discusses different instances where people have faked their own death:

Sometimes people fake their own deaths to escape marriage or criminal prosecution or to collect life insurance. In a recent case, John Darwin escaped financial difficulties and was believed lost at sea. His wife collected on two insurance policies. But five years later, Darwin returned “smelling dreadful” and ultimately was discovered and arrested.***

Former congressional candidate Gary Dodds was recently convicted of faking his own death in New Hampshire, with the possible motive of gaining a sympathy vote.***

Typically, faking one’s own death can range from a misdemeanor (such as for false swearing) to a felony (such as fraud).

French woman bequests all to her native village but with conditions attached

Helene Louart, who lived most of her life in Paris, retired in her native village in France’s Loire valley. She left all of her possessions amounting to 1,250,000 million euros to the village, but with controversial conditions attached.

For instance, Ms. Louart's house is to be sold only to a Parisian, all of her money must be used to build social housing, and the main street is to be renamed after her.

This interesting news video entitled Woman gives French village tricky choice from beyond the… is available online at cosmos.bcst.yahoo.com.

Law School Rankings

The following is posted as per the request of Edward A. Adams, Editor and Publisher of the American Bar Association Journal:

Because you’re a blogger who is a member of the legal education community, we thought you and your blog’s readers would be interested in an ABA Journal cover story about U.S. News & World Report’s law school rankings that was posted today (http://www.abajournal.com/magazine/the_rankings_czar/). And we’re holding a live online chat next month with the rankings czar from U.S. News in which you can participate.

Robert Morse, the man who created the law school rankings for U.S. News, offers an olive branch to law school deans who have long complained about the effect of the rankings on legal education. “Deans are welcome to call me or come by my office in Washington,” Morse says. “I want to work with them to improve the rankings.”

Some deans and former deans think they should engage the magazine, rather than just complain about it. “I think rankings need to be changed, and the only way that will happen is if law school deans sit down with Bob Morse for honest discussion,” says Nancy Rapoport, who resigned as dean of the University of Houston Law Center after her school dropped almost 20 points in the rankings. “I would attend a meeting like that without hesitation.”

This year’s U.S. News law school rankings are scheduled to be released this Friday, March 28.

Morse will be taking questions from the public on ABAJournal.com on Friday, April 11, from 3 to 4 p.m. ET. We hope you and your readers will participate.

Estate Planning for Pets

Rachel Hirschfeld (Attorney at law, Law Offices of Rachel Hirschfeld) has recently published her article entitled Ensure Your Pet's Future: Estate Planning for Owners and Their Animal Companions, 9 Marq. Elder's Advisor 155 (2007).

Here is an excerpt from the conclusion to her article:

Animal companions play a significant role in many people's lives, and many pet owners view their animal companions as valued members of their family and treat them as such.***

There are two kinds of animals: those who are abandoned and abused, and those who are raised in loving homes. The goal for owners who raise their pets in loving homes is to ensure their pets have a loving future, a smooth transition into a life chosen by the owners, and a life with people who will care for and about them. This is the reason owners may write pet trusts and pet protection agreements. Once an owner has adopted a pet, regardless of the way in which the pet came to the owner, the owner is responsible for the pet for the rest of the its life. A pet trust or pet protection agreement can help the owner fulfill this duty.***

It is important for an owner to create a pet trust that includes detailed instructions for the care of all animal companions. The pet trust and pet protection agreement should name a pet guardian to take custody of the pet and follow the detailed instructions for the pet's care, and name a successor pet guardian, trustee and successor trustee. Furthermore, if the pet trust does not include instructions on how to convey future funds, sufficient funds should be transferred to the trust or agreement for the pet's care. Pet trusts and pet protection agreements are ideal tools to use to help owners and their pets remain together, to ensure that pets are well-cared for, and to establish procedures for legally transitioning pet ownership.

Holographic Wills - A Beneficial Tool in Estate Planning

Stephen Clowney (Visiting Assistant Professor of Law, Oklahoma City University School of Law) has recently posted on SSRN his article entitled In Their Own Hand: An Analysis of Holographic Wills and Homemade Willmaking.

Here is an abstract of his article:

Holographic wills - wills that are handwritten and unwitnessed - are traditionally thought of as a risky, do it yourself brand of estate planning. In the author's view, this is wrong. Using two years' of probate records from Pittsburgh, Pennsylvania, this Article demonstrates that holographs are an indispensable tool for testators who are either unwilling or unable to commission a traditional will. Homemade testaments provide a low-cost alternative to intestacy, improve the overall quantity of will-making, function as a safety-net for testators who fall suddenly ill, and rarely result in litigation. The triumph of holographic wills also suggests, strongly, that state legislatures should consider reducing the number of requirements necessary to create a formal, attorney-authored will.

Firing a Trustee – Difficult to Do?

The following is from Fran Hawthorne, Breaking Up Is Hard to Do, NYTimes.com, March 18, 2008:

As a family trust moves into its second and third generations, it is almost inevitable that someone will be unhappy with a trustee.***

Dissatisfaction with trustees — particularly corporate trustees rather than individuals — has been growing over the last five years, those experts say. Most complaints center on investment performance, mostly because beneficiaries have become more financially sophisticated and more types of investments are now available.***

Experts disagree on how difficult it is to win a trustee-dumping case. Mr. Dardaman said that evidence like a log showing a long spate of unreturned phone calls or proof of poor investment returns could convince a judge. But Mr. Kahn said such complaints were not enough. “You have to do something egregious before the court will fire you as a trustee,” he said, like putting trust assets into an investment where the trustee has a personal interest. “The court may simply say you owe some money back to the trust.”***

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

Representation in Estate and Trust Proceedings Analyzed

Martin D. Begleiter (Ellis and Nelle Levitt Distinguished Professor of Law, Drake University Law School) has recently posted on SSRN his article entitled Serve the Cheerleader - Serve the World: Representation in Estate and Trust Proceedings and under the Uniform Trust Code and other Modern Trust Codes. 

Here is an abstract of his article:

This article is an in-depth examination of representation in estate and trust proceedings of one person (or class of persons) by a person who is already a party to the action. A person who is represented by another party need not be made a party to the proceeding for the judgment to be binding on such person, thus enabling the action to proceed without minors, unborns and persons under disability. The doctrine arose in England and was used in the United States in the early 1800's in cases involving multiple parties. In estate and trust proceedings, a restricted form of the doctrine was recognized at common law and in the first Restatement of Property. The doctrine was greatly expanded by New York legislation enacted in 1967, the elements of which have been adopted by many other jurisdictions, either by statute or case law. The use of representation is desired by attorneys, since it avoids the expense of appointing a guardian ad litem for unborns, minors and persons under a disability. The Uniform Trust Code and other modern trust codes have greatly expanded the uses of representation, creating substantial risks that judgments will not be binding on parties alleged to be represented. This article explores those risks and suggests changes in the representation doctrine. This draft of the article has not yet been edited by the Real Property, Probate and Trust Journal.

ERISA Basics CLE

ABA Joint Committee on Employee Benefits and the American College of Employee Benefits Counsel are sponsoring a conference on June 4-6, 2008, in Chicago, Illinois entitled ERISA Basics.

Here is how past participants have described this program:

“The format of overview and breakout sessions made virtually every minute of the conference useful and informative.  I was also impressed with not only the high legal caliber of the presenters but also their skill in presenting and teaching the material.”***

“The program catered to all levels of experience—from first year attorneys to those who have practiced for 10 years.  The program can either provide a new benefits attorney with the basic building blocks of benefits law, as it did me, or expand an experienced attorney’s knowledge of the basics.”

Effective estate planning is crucial for keeping vacation property in the family

The following is from Wendy S. Goffe’s article entitled From NASCAR Condominiums To Private Mausoleums: Keeping The Vacation Home In The Family (With Sample Tenancy In Common Agreement), published in the February 2008 issue of the ALI-ABA Estate Planning Course Materials Journal:

Few families successfully transfer ownership of a cabin or vacation property by accident. Families that do accomplish this Herculean feat do so only with a great deal of advanced multi-generational planning, often with mechanisms to adjust the plan as circumstances and needs change.***

The legal mechanism for transferring the property is only the first of many challenges. Following the transfer, the next generation must determine how to maintain the property; how to pay taxes, insurance, and maintenance; and how to divide use of the property among the family members.***

Once the family members are informed of the various options (which may include setting aside portions for conservation purposes, selling portions to raise capital to support the remaining property, and transferring portions to succeeding generations), the first step in creating a master plan is to have the facilitator interview each family member.***

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

Economic Downfall and Its Effect on Charities

According to Stephanie Strom, Weakness in Economy Isn’t Hurting Charities, NYTimes.com, March 14, 2008:

Despite the economic downturn and fears of recession, major charities say their fund-raising has not fallen off.***

In fact, some 64 percent of the organizations that have responded so far to the Association of Fundraising Professionals’ annual survey on fund-raising have reported bringing in more money in 2007 than the year before.***

Revenue at the March of Dimes rose 4.5 percent in 2007 on an unaudited basis, said Carol Portale, the organization’s senior vice president for customer relationship management and direct response.***

Darell Hammond, chief executive of KaBOOM!, a nonprofit group that builds and maintains playgrounds, said he and his senior management team were keeping a close eye on revenue to see what effect, if any, the organization would feel from economic weakness. The 12-year-old group has long been a favorite of corporate donors, and declines in corporate donations tend to be steeper during hard times than do reductions in gifts from other sources.***

Estate Advisor’s Role in Family Wealth Planning

The Le Van Company has recently posted on its website an article entitled Family Mission Statements: What Estate Advisors Need to Know. This article was also published in the March 2008 issue of the Estate Planning magazine.

According to this article:

Inevitably, boomers will enlist other estate planning advisors to support healthy wealth objectives, to recommend or evaluate a myriad of healthy wealth resources and resource persons[.]*** As a first step toward healthy wealth, wealthy families are counseled to draft a “family mission statement”. What is the estate advisor’s role in the drafting process?***

[O]rganizing should begin with the family’s relational estate, its most valuable nonfinancial asset. The relational estate rests on three fundamental building blocks: genetics, family history and family heritage[.]***

The goal of mission statements is to help keep the peace in affluent families. By agreeing on a basic set of principles, families hope to avoid lawsuits between relatives about money. They also hope to draw up moral guides for future generations, so that kids and grandkids will inherit values as well as wealth.***