Wills, Trusts & Estates Prof Blog

Hong Kong Pop Diva’s Estate Disputed

The following is from Mum disputes will, straitstimes.com, April 17, 2008:

Cantopop diva Anita Mui left behind assets worth HK$30 million (S$5.2 million) to HK$35 million when she died in 2003.

Her estate is now valued at HK$100 million.

Details of Mui's assets were revealed on Tuesday in a Hong Kong court hearing in which her mother Tam Mei Kam, 84, is battling to gain control of her estate.***

The will left two properties in Hong Kong and London to her close friend, fashion designer Eddie Lau, and up to HK$1.7 million for her four nephews and nieces' education.***

But Madam Tam wants the will to be declared invalid, which would entitle her to the entire estate.

She claims her daughter did not have the mental capacity to sign the will when she was under the influence of tranquillisers to treat her illness.***

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

Top SSRN Downloads

Here are the top downloads from February 19, 2008 to April 19, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	325	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	252	Back to School: The New Parameters of Funding a Grandchild's College Education Richard L. Kaplan, University of Illinois College of Law, Date posted to database: February 13, 2008 Last Revised: April 14, 2008
3	144	Empty Promises: Settlor's Intent, the Uniform Trust Code, and the Future of Trust Investment Law Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: February 6, 2008 Last Revised: March 17, 2008
4	88	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
5	80	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
6	75	Caregiving and the Case for Testamentary Freedom Joshua C. Tate, Southern Methodist University - Dedman School of Law, Date posted to database: March 25, 2008 Last Revised: April 11, 2008
7	74	Spiritualism and Will(s) in the Age of Contract Christopher J. Buccafusco, University of Chicago - Law School, Date posted to database: February 25, 2008 Last Revised: February 25, 2008
8	73	Rector and Gore: Two Recent Flp Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: March 4, 2008 Last Revised: March 4, 2008
9	68	Bigelow: The Ninth Circuit on FLPs Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: December 17, 2007 Last Revised: December 17, 2007
10	58	How Do I Love Thee, Let Me Count the Days: Deathbed Marriages in America Terry L. Turnipseed, Syracuse University College of Law, Date posted to database: January 29, 2008 Last Revised: January 29, 2008

New Jersey Supreme court holds that decoupling of estate tax not retroactive

The court explained in Oberland v. Director, Div. of Taxation, 940 A.2d 1202 (2008), that it would be manifestly unjust to apply a statute which reduced the amount of assets that could pass free of state estate tax retroactively.

Passive Loss Rules and Their Effect on Trust Planning

Martin M. Shenkman, (Attorney at Law, Martin M. Shenkman, P.C.) has recently published his article entitled Trusts and Passive Loss Rules, Prob. & Prop., March/April 2008, at 8.

Here is the conclusion to his article:

The material participation test and the application of the passive loss rules can have substantial effect on trust planning, real estate structures, and estate planning. The law remains uncertain, and the limited authorities seem to imply a conceptually flawed framework that will likely lead to fact-specific cases that will not provide simplicity or bright-line tests. In the end, to be consistent with the purposes for which the passive loss rules were enacted, the approach to resolving this issue should consider the activities of all fiduciaries as well as who is taxable on trust income or loss in making the determination.

The Will Contest--Injunction Interface

In Goldthorn v. Goldthorn, 242 S.W.3d 797 (Tex. App.—San Antonio 2007, no pet. h.), the trial court issued a temporary injunction freezing the testatrix’s assets until a suit to aside the testatrix’s will on the basis of lack of capacity was concluded.

The appellate court reversed holding that there was no evidence that (1) an irreparable injury would occur if the injunction were not granted or (2) that the will contest action had a probable chance of succeeding.

Moral:  To obtain a temporary injunction freezing estate assets, it is essential for the will contestant to show that (1) an irreparable injury would occur if the injunction is not granted, and (2) that the will contest has a probable chance of succeeding.

Removal of Executor; Creation of Trust; Trustee Acceptance

The following is a discussion of In re Estate of Kappus, 242 S.W.3d 182 (Tex. App.—Tyler 2007, pet. denied).

(1) Removal of Executor:  Beneficiaries’ Mother (the testator’s ex-wife) moved to have Independent Executor removed from office because he shared ownership of certain estate property with his deceased brother and allegedly had a conflict of interest with the beneficiaries.  Mother argued that he could not adequately represent the estate while seeking to retain his own share of the property.  The trial court denied the motion and the appellate court reversed.

The court begin its analysis by explaining that great deference is given to the testator’s choice of an independent executor.  However, the named executor may be removed for the reasons specified in Probate Code § 149C.  In this case, the estate and the executor are in conflict regarding a 4.86% interest in the property because both claim ownership to this property.  The court concluded that the existence of this conflict requires the trial court to remove the executor.

Moral:  Naming an executor who co-owns property with the testator is problematic should a dispute over the amount each actually owns arises after the testator’s death.

(2) Creation of Trust: The trial court held that a testamentary trust was not created because no steps had been taken to fund the trust.  The appellate court reversed.  The court explained that the will left the residue of Testator’s estate to a trust, the provisions of which were set forth in the will.  Under Probate Code § 37, title to property devised in a will vests immediately in the beneficiaries upon the testator’s death.  The will contained nothing which would delay this vesting.  Thus, the property vested immediately in the trustee.

Note:  The court went on to explain that although the trial court did not reach the issue of removing the trustee from office under Property Code § 113.082, since the trust was actually created, it was an abuse of discretion for the court not to remove the trustee from office for having a conflict of interest (the trustee was personally claiming ownership to a portion of the property claimed by the trust).

Moral:  Unless the will provides otherwise, a testamentary trust is created as of the date of the testator’s death.

(3) Trustee Acceptance:  The appellate court explained that “[w]hen the same person is named as independent executor and as trustee of a testamentary trust, acceptance of the position of trustee will be presumed from his or her having acted as executor.”  Kappus at 191.  It appears that the court is engrafting this as either an additional method of acceptance or as coming within the acceptance methods specified in Probate Code § 112.009.

Moral:  An executor who is also named as the trustee of a testamentary trust must take clear action to reject the trusteeship if the executor does not wish to serve in that capacity.

Valuation discounts related to FLP may apply for elective share purposes

In In re Estate of Hjersted, 175 P.3d 810 (Kan. 2008), the court held that in valuing partnership interests owned by a deceased spouse for purposes of calculating the surviving spouse’s elective share entitlement, discounts for lack of marketability and lack of control are “not precluded.”

The majority of the court suggested “general contours of guidance” for consideration on remand, including consideration of the balance to be struck between the policy behind the elective share and the legitimate aim of reducing valuation for estate tax purposes.

Three justices concurred, taking strong exception to the detailed nature of the “guidance.”

Siegel’s Heirs Receive a Share of Superman Copyright

According to Michael Cieply, Ruling Gives Heirs a Share of Superman Copyright, NYTimes.com, March 29, 2008:

A federal judge here on Wednesday ruled that the heirs of Jerome Siegel — who 70 years ago sold the rights to the action hero he created with Joseph Shuster to Detective Comics for $130 — were entitled to claim a share of the United States copyright to the character.***

[T]he ruling threatened to complicate Warner’s plans to make more films featuring Superman, including another sequel and a planned movie based on the DC Comics’ “Justice League of America,” in which he joins Batman, Wonder Woman and other superheroes to battle evildoers.***

[T]he judge’s 72-page order described how Mr. Siegel and Mr. Shuster, as teenagers*** worked together on a short story, “The Reign of the Superman,” in which their famous character first appeared not as hero, but villain.***

When Detective Comics bought 13 pages of work for its new Action Comics series the next year, the company sent Mr. Siegel a check for $130, and received in return a release from both creators granting the company rights to Superman “to have and hold forever,” the order noted.

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

ABA 2008 Student Writing Contest

The following is from the official ABA announcement:

The University of Miami School of Law Graduate Programs in Estate Planning and Real Property Development is sponsoring the 2008 Real Property, Trust and Estate Law (RPTE) law student writing contest. The first-place winner will receive $1,500 cash and a one-year membership in the RPTE Section (valued at $50). The winner will also receive free round-trip airfare and weekend accommodations to attend the RPTE Fall Leadership Meeting, November 5th - 9th in Montreal, Quebec Canada (valued at approximately $1,000). In addition, the winner’s essay will be considered for publication in a future issue of the Real Property, Probate and Trust Journal and announced in Probate & Property, the Section magazine.

The second-place winner will receive $700 cash and will be announced in Probate & Property. The third-place winner will receive $500 cash and an honorable mention in Probate & Property.

2008 Contest Rules and Entry Form - Deadline June 20th, 2008.

Spousal Abandonment and the Elective Share

In Purce v. Patterson, 654 S.E.2d 885 (Va. 2008), the court analyzed a state law which disqualifies a surviving spouse from taking the elective share or by intestacy if he or she “willfully deserts or abandons” the other spouse and such desertion or abandonment continues until death.

The court stated that the relevant period for determining abandonment extends to the time of the deceased spouse’s death and that even though the couple agrees to separate, conduct after the separation can amount to abandonment within the meaning of the disqualification statute.

The sale of an asset by a successor trustee does not cause ademption

A father created a self-trusteed revocable trust which made specific gifts of stock in a closely held corporation to his two sons.  After the father was adjudged to be incapacitated, the court appointed a professional conservator who was then appointed as the successor trustee. 

The successor trustee sold the assets of the corporation.  The court in Brown v. Labow, 69 Cal. Rptr. 3d 417 (Cal. Ct. App. 2007), held that the gift of the stock was not adeemed by the sale because there was no evidence that the settlor intended an ademption in these circumstances and that the conservator had no authority to revoke the gift of stock without court approval.

Hot Topics CLE

The American Bar Association Section of Real Property, Trust and Estate Law and the ABA Center for Continuing Legal Education are sponsoring a teleconference and live audio webcast entitled Hot Topics in Trusts and Estates on May 1, 2008.

Here is a description of the program:

Sharpen your skills and learn about the latest estate planning developments at this teleconference and audio webcast, broadcast live from the ABA Section of Real Property, Trust and Estate Law Spring Symposia in Washington, DC. 

Join our panel of renowned experts as they share their thoughts on current and possible cases, legislation, possible regulations, and rulings and their importance to your practice.  The panel will discuss the developing legal situations that test the boundaries of the law.
Topics will include: 

• The status of estate tax repeal and reform, including:
  • The March 12 Senate Finance Committee hearing on alternative systems to the federal estate tax
  • The April 3 Senate Finance Committee hearing on possible reforms to the federal estate tax
  • A review of the position of each of the Presidential candidates on the federal estate tax
• The significance of the recent Tax Court decision, Estate of Mirowski, in family limited partnership planning
• What new releases may be coming from the Treasury Department in the near future
• How the new preparer penalties will affect an estate administration practice
• Planning in light of the IRS response to Knight/Rudkin
• Defined value clauses after Estate of Christiansen v. Commissioner

Attorney Resigns for Bad Behavior as Agent

On January 15, 2008, the Supreme Court of Texas accepted the resignation of a Texas lawyer in lieu of discipline.

Here is a description of the attorney's evil conduct as described in Disciplinary Actions, 71 Tex. B.J. 226, at 228 (2008):

[A]cting under a power of attorney from the complainant, [attorney] withdrew funds from the complainant’s financial accounts for [his] personal use and obtained credit cards in the complainant’s name that [he] used for his own personal use, without the complainant’s knowledge or approval. After receiving a notice of revocation of the power of attorney, [he] continued to withdraw funds from the accounts and continued to use the credit cards. [He] committed the criminal offenses of theft and misapplication of fiduciary property.

Knight Analyzed

Helen Gunnarsson (Highland Park, Illinois) has recently published her article entitled Supremes limit trusts' ability to subtract investment-advice costs, 96 Ill. B.J. 123 (2008), in which she explains how SCOTUS held that "trusts are subject to a two-percent floor for subtracting advisory fees from their taxable income" in Knight v. Commissioner, 128 S. Ct. 782 (2008).

Ms. Gunnarsson concludes that:

After Knight, lawyers will have to consider carefully whether and to what extent they may have advised their trust and estate clients on a matter related to an investment - which could be as mundane as advising the trustee or executor on hiring someone to cut the grass on a piece of real estate owned by a trust or estate - to determine to what extent their fees are fully deductible to their clients * * *.

Disclaimer may not defeat worker’s compensation insurer’s subrogation right

The decedent was shot and killed while performing his duties as an employee and his wife received benefits under the decedent’s employer’s worker’s compensation insurance.

The wife then brought a wrongful death proceeding against her husband’s killer and reached a settlement which would be distributed to her and the couple’s children pursuant to the intestacy statute.

Because the employer would be subrogated by statute to her rights in the wrongful death settlement to the extent of the benefit’s she had received, the wife disclaimed her right to the wrongful death proceeds.

In Gillette v. Wurst, 937 A.2d 430 (Pa. 2007), the court held that a disclaimer cannot defeat the statutory subrogation right.

The Van Gogh Legacy

The following is from Robert L. Moshman, Esq., Vincent van Gogh, published in the April 2008 issue of The Estate Analyst:

The van Gogh estate isn't set up as a marketing machine that generates huge earnings. There aren't tours as with Graceland for the Elvis estate.**** But consider what the output of Vincent van Gogh is worth today as another gauge of value.

In 1990, 100 years after the artist's death, van Gogh's Portrait of Dr. Gachet sold for $82.5 million which was then the highest price ever paid for a painting. There are 900 paintings and 1,100 other works by van Gogh, though not all are as valuable. If the 900 paintings averaged $50 million apiece that would amount to a mind-boggling $45 billion.***

But let us flash forward 100 years or 500 years. Many rock stars will have come and gone and there may be scant interest in a pompadoured hip shaker of the mid 20th century.***

By contrast, the finest examples of Van Gogh, being rare collectibles coveted by museums, will continue to be the ultimate status symbol for the collections of the super rich.

State Advance Directive Forms – Greater Uniformity Needed

Werner Gruber (Notes Editor 2007-2008, The Elder Law Journal; J.D. Candidate 2008, University of Illinois at Urbana-Champaign) has recently published his Note entitled Life and Death on Your Terms: The Advance Directives Dilemma and What Should Be Done in the Wake of the Schiavo Case, 15 Elder L.J. 503 (2007).

Here is the introductory paragraph to his Note:

In early 2005 the story of Terry Schiavo dominated newscasts around the world. The Schiavo story sparked debate and discussion about end-of-life treatment, including the religious and moral implications of advance directives. Advance directives are legal documents that allow a patient to convey their end-of-life wishes before the critical point when such decisions must be made. While the United States has taken steps to adopt both federal and state legislation to promote advance directives, a lack of uniformity of procedure and documentation between the states is hindering widespread documentation of end-of-life wishes. Advance directives are often not utilized despite increased awareness of the need for end-of-life protection. In this Note, Mr. Gruber supports the passage of pending federal legislation with the additional call for greater uniformity in state advance directive forms.

University Endowments and the Role of Donors’ Wishes

According to Karen W. Arenson, When Strings Are Attached, Quirky Gifts Can Limit Universities, NYTimes.com, April 13, 2008:

[T]he Seeger money, which must be spent only on matters Greek, is now worth $33 million, multiplying through aggressive investing like the rest of Princeton’s endowment. So the university offers Greek, Greek and more Greek[.]

“Institutions do get shaped by the interests of donors,” said Robert K. Durkee, vice president and secretary of Princeton.***

Recent interviews with college officials show that while many restrictions are for broad uses like faculty chairs and student aid, others are less central to the functioning of a modern university. Some are outright quirky.***

College officials say they try to be receptive to donor wishes, even when they sometimes seem strange. That happened at Wellesley College, when Leonie Faroll, a 1949 graduate, asked the college to use her gifts for the college’s power plant. When she died in 2003, those gifts totaled $860,000.***

Top SSRN Downloads

Here are the top downloads from February 14, 2008 to April 14, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	305	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	238	Back to School: The New Parameters of Funding a Grandchild's College Education Richard L. Kaplan, University of Illinois College of Law, Date posted to database: February 13, 2008 Last Revised: February 23, 2008
3	139	Empty Promises: Settlor's Intent, the Uniform Trust Code, and the Future of Trust Investment Law Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: February 6, 2008 Last Revised: March 17, 2008
4	111	The Strict Rules of Charitable Split Interest Gifts Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: January 29, 2008 Last Revised: January 29, 2008
5	71	Spiritualism and Will(s) in the Age of Contract Christopher J. Buccafusco, University of Chicago - Law School, Date posted to database: February 25, 2008 Last Revised: February 25, 2008
6	69	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
7	68	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
8	65	Bigelow: The Ninth Circuit on FLPs Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: December 17, 2007 Last Revised: December 17, 2007
9	53	How Do I Love Thee, Let Me Count the Days: Deathbed Marriages in America Terry L. Turnipseed, Syracuse University College of Law, Date posted to database: January 29, 2008 Last Revised: January 29, 2008
10	42	Serve the Cheerleader - Serve the World: Representation in Estate and Trust Proceedings and under the Uniform Trust Code and other Modern Trust Codes Martin D. Begleiter, Drake University Law School, Date posted to database: January 9, 2008 Last Revised: January 9, 2008

Unregulated Disposition of Human Remains – Change Needed

Ann M. Murphy (Associate Professor, Gonzaga University School of Law; 2007 - 2008 Fulbright Lecturer, Beijing, China) has recently published her article entitled Please Don't Bury Me Down in that Cold Cold Ground: The Need for Uniform Laws on the Disposition of Human Remains, 15 Elder L.J. 381 (2007).

Here is the introductory paragraph to her article:

The disposition of a decedent's remains is a largely unregulated area. While there are federal regulations concerning the funeral industry, there are none dealing with the disposition of remains in particular. The lack of federal regulation, limited state authority on the ownership of remains, and wishes of the decedent often result in conflict. Such conflicts are often left to be resolved by courts and funeral homes. The lack of uniformity in this type of law increases in importance as the baby boom generation ages and demands creative options concerning their final resting place. In this Article, Professor Murphy explores the increasing need for certainty in this area and proposes the adoption of a uniform law patterned on one of the existing state statutory schemes.

Curious Stories of Tax Evasion

The following is from Famous Tax Scandals, describing various “[h]igh-profile tax troubles through the ages,” posted on money.aol.com:

Al Capone

The granddaddy of 'em all. Legend has it that the notorious gangster once remarked that tax laws were a joke because "the government can't collect legal taxes on illegal money."

The IRS charged the infamous Chicago mob boss with failure to pay four years' worth of taxes. Capone was sentenced to 11 years in jail and an $80,000 fine in 1931.***

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