Wills, Trusts & Estates Prof Blog

Happy Groundhog Day!!

Best wishes for a Happy Groundhog Day!!

Punxsutawney Phil saw his shadow this morning and directed President Bill Cooper to the  scroll which proclaimed

"As I look around me, a bright sky I see, and a shadow beside me.
Six more weeks of winter it will be!"

See Phil Says Six More Weeks of Winter!, groundhog.org, Feb. 2, 2008.

Top SSRN Downloads

Here are the top downloads from December 4, 2007 to February 2, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days:

Rank	Downloads	Paper Title
1	78	Conservation Easements: Perpetuity and Beyond Nancy A. McLaughlin, University of Utah - S.J. Quinney College of Law, Date posted to database: December 12, 2007 Last Revised: January 11, 2008
2	22	GST Qualified Severance Regulations: Final and Proposed Marc Chorney, Author - Affiliation Unknown, Date posted to database: December 9, 2007 Last Revised: December 9, 2007
3	17	Child Labour: The Partial Fiduciary Accountability of Parents Robert Flannigan, University of Saskatchewan, Date posted to database: January 6, 2008 Last Revised: January 6, 2008
4	14	In Their Own Hand: An Analysis of Holographic Wills and Homemade Willmaking Stephen Clowney, U.S. Court of Appeals for the Third Circuit, Date posted to database: January 15, 2008 Last Revised: January 15, 2008
5	13	'Living Will' and the Nigerian Law: The Need for Legislative Intervention Ademola Oladimeji Okeowo, Matrix Solicitors, Date posted to database: December 4, 2007 Last Revised: January 14, 2008

Trust Investment Law

Jeffrey A. Cooper (Associate Professor of Law, Quinnipiac University School of Law) has recently posted on SSRN his article entitled Empty Promises: Settlors' Intent, the Uniform Trust Code, and the Future of Trust Investment Law.

Here is the abstract of his article:

Many trust documents contain specific investment management directives, such as a mandate that the trustee retain a specific investment. Whereas trust investment law historically has honored the intent of the settlors who impose such restrictions, some would read the Uniform Trust Code (the UTC) to codify a very different rule. Under this emerging rule, the enforceability of a trust investment restriction would hinge upon objective notions of prudence and efficiency, without regard to a settlor's subjective intent.

Although the UTC is now the law in nearly half of the states, this potentially revolutionary change has received almost no scholarly attention. The scant literature on this subject emphasizes the potential benefits of the emerging rule, predicting that it will liberate trust beneficiaries from irrational investment restraints and promote the most efficient deployment of trust investment resources. However, the literature completely lacks a critical analysis of the emerging rule's potential effect on future trust settlors. This Article fills that void, revealing how the emerging rule would produce a series of undesirable consequences and would weaken trust law by incentivizing trust settlors to avoid its undesirable provisions.

Viewed from this perspective, the emerging benefit the beneficiaries rule simply cannot achieve its desired impact, and the promises it offers trust beneficiaries prove to be empty ones. As such, trust investment law would be better served by expansion of what some might consider less ambitious doctrines-- ones which seek to aid the beneficiaries of settlors who have made mistakes or failed to anticipate changed circumstances but provide no aid in cases where a settlor intentional and thoughtfully impaired beneficiaries' economic rights. Trust investment law cannot meaningfully redress those latter cases. It should not destroy itself by trying.

Prof. Cooper "would very much welcome any thoughts or comments you might have."  Please follow this link to send him your comments.

GST and the Qualified Severance Rules for Trusts

Marc Chorney  (Attorney at Law, Chorney & Millard LLP) has recently posted on SSRN his article entitled GST Qualified Severance Regulations: Final and Proposed. 

Here is the abstract of his article:          

Prior to 2001, downstream divisions of trusts were prohibited for Generation-skipping Transfer Tax (GST) purposes. A Qualified Severance of a trust is now allowed. If a trust is properly severed, unnecessary payment of GST tax can be avoided. Final and proposed regulations were issued in August, 2007 explaining the Qualified Severance rules. This article discusses those regulations.

A Discussion of the Estate Tax Controversy

Ann Mumford (Senior Lecturer in Tax, University of London , Queen Mary School of Law) has recently posted on SSRN her article entitled Inheritance in Socio-Political Context: The Case for Reviving the Sociological Discourse of Inheritance Tax Law. 

Here is the abstract of her article:         

The anti-'death tax' movement is the starting point for contemporary discussions of inheritance taxation. The political rhetoric surrounding calls for its repeal typically is met with analyses of the extent to which inheritance tax avoidance benefits the wealthy, and arguments that inheritance taxation is fair and 'targeted'. This article suggests that engagement by tax lawyers with sociological theories of economic inheritance has the potential to revive this discourse. A renewed approach to inheritance taxation is of immediate concern to supporters of inheritance taxation in the United Kingdom , who face considerable obstacles posed by the increasing use of United States anti-inheritance tax movement political rhetoric by politicians. Durkheim's consideration of the conjugal family and, more recently, Beckert's sociology of inheritance are submitted as analyses that, amongst others, have particular potential. Such engagement also has the potential to revive the interest of sociologists in inheritance taxation, memorably described by MacNamee and Miller as a sociological lacuna.

James Bruce Coffman Dies -- Organ donees lose hero

It is with great sadness that I report that James Bruce Coffman (J.B.), died on January 19, 2008 in Houston, Texas.  The following is from his obituary in the Houston Chronicle:

He was a loving husband to his wife Pepi, an amazing dad, a doting granddad, a valued mentor and a loyal friend. He earned the respect of everyone who knew him.***

   

One of J.B.'s proudest achievements was as founder and chairman of Oil Industry Lifesaving (OIL) Flights, which used petroleum corporate aircraft during the 1980's to aid organ transplant recipients. J.B. recruited 47 petroleum companies to form a fleet of 56 corporate aircraft that donated emergency flights for organs, surgical teams and/or organ recipients and their families at a time when there were limited transplant centers in the United States.

Estate and Business Planning Conference

On February 7 and 8, 2008, the Southern California Institute is sponsoring a conference entitled The Gathering 2008 in San Diego, California. Here is a summary of the program:

The Gathering is a yearly event primarily for advisors in Estate and Business planning. In today’s world no one person can be an expert in all areas of estate, business, tax, and wealth planning.

Some of the topics to be covered include:

·         What’s New – The Heckerling Update

·         Retirement Planning Update

·         New IRS Appraiser & Appraisal Requirements

·         ILIT Rescue Strategies

·         Online Client Data Access

·         Putting Heckerling Into Our Wealth Plans

·         World Class Retail and Wholesale Seminars

·         Corporate Trustee Advantages & Opportunities

·         Asset Protection Planning in 2008

·         "Circle of Friends" Black-Tie Optional Gala

Property of unmarried couple to be equitably divided upon the death of both parties

Washington law has long recognized that property acquired jointly during the existence of a committed intimate relationship is subject to equitable distribution between the parties on the termination of the relationship.

In Olver v. Fowler, 168 P.3d 348 (Wash. 2007), the court held that the doctrine applies when both parties are dead, requiring an equitable division of property between the two estates before a will or the intestacy statute applies to the property.

Beneficiary has no standing to challenge the actions of a trustee while the settlor can revoke

Father created a revocable trust with himself and his son as co-trustees.  Before his death, father sold stock held in the trust to his son.

After the father’s death, his daughter, who is a beneficiary of the trust, brought suit against the son several grounds including beach of duty and negligence.

Describing this as a case of first impression, the court held that the daughter lacked standing to complain about the settlor’s actions with regard to trust property which occurred while the settlor had the power to revoke.  Moon v. Lesikar, 230 S.W.3d 800 (Tex. App. 2007).

Withdrawal of a will from probate does not revive a prior will

After the decedent’s 2001 will was admitted to probate, the nominated executor withdrew the will from probate and offered the decedent’s 1973 will for probate.  The 2001 will included a clause revoking all prior wills.  The 1973 will was then admitted for probate.

   

On appeal, the court held that if the 2001 was validly made and executed, the 1973 will was revoked and not entitled to probate.  Estate of Woodfield, No. 2004-CT-00238-SCT, 2007 WL 3197739 (Miss. Nov. 1, 2007).

Qualifying for a Charitable Deduction

Prof. Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled The Strict Rules of Charitable Split Interest Gifts.  Her article also appears in Tax Notes, Vol. 118, No. 5, 2008.

Here is the abstract of her article:         

When giving both to your family and to your charity, you must follow the rules carefully to qualify for a charitable deduction. The article discusses the recent Tamulis case, other split interest charitable deduction cases, and the doctrine of substantial compliance.

New Jersey Has the Highest Percentage of Millionaire Households in the Nation

According to New Jersey Has Highest Percentage of Millionaire Residents, Jan. 9, 2008, phoenixmi.com:

The Phoenix Affluent Marketing Service, a Phoenix Marketing International practice, announced today that New Jersey has become the state with the largest percent of millionaires to total households. Ranked second past two years, New Jersey vaulted past Hawaii, which fell to fourth in the 2007 rankings.***

“Traditional East Coast concentrations of wealth have continued to outperform most of the rest of the country,” says David Thompson, Managing Director of the Phoenix Affluent Practice. “This is a function of three factors: high levels of education; access to top paying jobs in finance and technology; and a stock market that has advanced over the past four years,” notes Thompson.***

The complete states’ rankings for 2005 through 2007 are available by visiting the Phoenix site at http://www.phoenixmi.com/prfiles/State_Rankings_Millionaires_2005-2007.xls.***

Special thanks to Neil E. Hendershot, Esq. (Attorney at law, Goldberg Katzman, P.C., Adjunct Professor, Widener University School of Law) for bringing this article to my attention.  You can read more on Neil's blog at PA Elder, Estate & Fiduciary Law Blog.

Trustee’s lack of diversification was not unreasonable

The beneficiaries of testamentary and lifetime trusts which were invested in common stock of a closely held business objected to the trustees’ accountings alleging liability for failure to diversify.

The court affirmed the dismissal of the objections, holding that retention did not violate New York’s version of the prudent investor rule because the stock was particularly unmarketable given the capital structure of the corporation, the high dividend payout served the beneficiaries’ needs, the settlors used the trust as a device for insuring that ownership of the corporation remained in the family, and the corporate co-trustee regularly explored selling the stock and kept well informed of the corporation’s financial situation.  In re Hyde, 845 N.Y.S.2d 833 (N.Y. App. Div. 2007).

Real property not transferred to a trust passes with stock of a holding company

The testator’s will poured over the residue of his estate to his lifetime trust which directed the trustee to distribute to named persons certain parcels of real property owned by a corporation of which the testator was sole shareholder.

   

The testator never transferred ownership of the realty to the trustee and at his death the realty was still owned by the corporation.  All the shares poured over to the trust, the residue of which passed to the testator’s widow.  The trust beneficiaries of the realty sued the widow as successor trustee seeking to surcharge her for refusing to distribute the realty to them.

   

The court in Vaughan v. Boerckel, 963 So. 2d 915 (Fla. Dist. Ct. App. 2007), affirmed judgment for the widow, holding that the failure to transfer title to the realty to the trustee meant that title remained in the corporation all the shares of which passed to the widow.

Survey Shows Americans Prefer to Hang on to Their Retirement Accounts

The following is from Eileen Alt Powell, Americans Delay Spending IRAs, sfgate.com, Jan. 27, 2008:

Americans who have money stored in Individual Retirement Accounts tend to hang on to it for use in the later years of their retirement, according to a study being released Monday.

The Investment Company Institute, a Washington, D.C.-based trade association, found that less than one-fifth of households with IRAs made withdrawals from their accounts in tax year 2006, with the typical withdrawal averaging about 6 percent of the balance.***

She said that other studies have found that people want to hang on to their IRA money as long as possible to preserve the tax advantages.***

The greatest growth has come from assets rolled over into IRAs from employer-sponsored accounts like 401(k)s, the study said. In tax year 2006, just 14 percent of U.S. households made contributions directly to IRAs, it said.***

Bypass Trust Basics Explained

According to Ronald Lipman, Bypass trusts can reduce couples' estate taxes, chron.com, Jan. 25, 2008:

Bypass trusts are usually created by married people as a way to save estate taxes.

Under current law, everyone can leave as much as $2 million free of estate taxes at death. Married persons can also leave each other an unlimited amount of money and property with no estate taxes.

Many married couples have simple wills and leave all their property directly to the other. Although no estate taxes are owed at the first spouse's death, this leaves assets stacked up in the estate of the surviving spouse.***

A bypass trust can sharply reduce this tax.***

Not all kinds of property are appropriate for a bypass trust, and not all bypass trusts are written the same.

Also, different rules may apply to non-United States citizens.

Posthumously conceived children are beneficiaries of a trust created by a “grandparent”

A grandfather created lifetime trusts which gave the trustees discretion to sprinkle principal among his descendants during the life of his widow.  At her death, she has a special testamentary power of appointment among her husband’s descendants who are also the takers in default.  One of grandfather’s sons predeceased him by six months.

Using the son’s stored semen, his widow conceived and sons were born to her 3½ and 5½ years after her husband’s death.  The trustees brought a proceeding for advice and direction regarding the status of the posthumously conceived children.

The court held that both children were beneficiaries of the trusts because a “sympathetic reading” of the trusts indicated that the grandfather intended “all members of his bloodline to receive their share.”  In re Martin B, 841 N.Y.S.2d 207 (N.Y. Sur. Ct. 2007).

Texas Court Holds Contract Did Not Create Trust for the Care of an Animal

In Sarah v. Primarily Primates, No. 04-06-00868-CV (Tex. App. Jan. 16, 2008), Ohio State University contracted with Primarily Primates, Inc. (“PPI”) to accept ownership and care for 12 primates. Shortly after the primates’ arrival at PPI, two of them died, and a third escaped from a cage. Thereafter, several interested persons filed suit against PPI, requesting, among other things the creation of a trust and an award of damages in the amount of the full contract price to be held in trust and applied towards the acquisition of shelter and care at a suitable facility. The trial court held that the interested persons lacked standing to sue.
   

On appeal, the court considered Section 112.037 of the Texas Trust Code, which allows a trust to be created to provide for the care of an animal alive during the settlor's lifetime. Such trust may be enforced by a person appointed in the terms of the trust or, if a person is not appointed, by a person appointed by the court. The court ruled, however, that just because the Trust Code allows the creation of a trust to provide for the care of an animal, it does not necessarily mean that every contract relating to animals creates such a trust.
   

The Appellate Court held that because the contract between Ohio State University and PPI did not create a trust to provide for the care of the primates, appellants had no standing to bring their claims.

Statute revoking provisions of a will in favor of an ex-spouse upon the testator’s divorce did not violate a ban on retroactive laws

The testator executed a will leaving his estate to his spouse.  They divorced less than one year later and sixteen years thereafter, New Hampshire enacted its version of UPC § 2-508 which revokes testamentary provisions for a spouse on divorce.

The testator died seven years after the statute’s enactment and the ex-spouse petitioned for administration, alleging that the statute as applied to the testator’s will violated the state constitutional prohibition against retroactive laws.

In Estate of Sharek, 930 A.2d 388 (N.H. 2007), the court held that the statute was constitutional and that the ex-spouse had no vested right in the testator’s will.

The trustee’s fiduciary duty was paramount in determining the propriety of expenditures

A grandfather created a testamentary trust directing the trustees to distribute to his granddaughter so much of the income and principal as the trustees determined to be advisable for her “proper support, education, maintenance and general welfare.”

The beneficiary’s father, as co-trustee, used trust funds to pay for the beneficiary’s secondary school tuition and certain medical expenses.  The beneficiary challenged those expenditures in an accounting proceeding.

The court reversed the approval of the expenditures holding that while the expenditures were authorized by the governing instrument, a hearing was required to determine whether the trustees acted in good faith and in furtherance of the beneficiary’s best interests.  In re Wallens, 9 N.Y.3d 117 (2007).

Would a T&E Professor Merit a $4.2 Million Condo?

To convince Catherine M. Sharkey to leave Columbia University, The New York University purchased for her a $4.2 million condo with 4,000 square feet overlooking Central Park.

The following is from Josh Barbanel, Recruiting With Real Estate, NY Times, Jan. 20, 2008:

The property records show that the foundation spent $4.2 million two weeks ago to buy an 80 percent interest in the turreted apartment. The foundation had $155 million in assets at the end of 2006 and it is dedicated to supporting N.Y.U.’s law school, including the hiring and retention of faculty members.

Ms. Sharkey and her partner, Ina Bort, who practices commercial and maternity law in New York, bought the remaining 20 percent interest in the apartment for $1.05 million, but the foundation provided them with a mortgage to cover $650,000 of their share of the purchase price for up to 30 years (unless Ms. Sharkey leaves the university before then).

John Beckman, an N.Y.U. spokesman, said that the university and its law school provide housing for a “very large percentage” of faculty members, but he could not recall the purchase of such an expensive apartment for other faculty members.

Note that Prof. Sharkey is not a senior faculty member -- she graduated from law school in 1997 and has been teaching for only five years.  I wonder what fancy digs their senior faculty receive and whether  such perks go to their T&E faculty?

Living Wills in Nigeria

Ademola Oladimeji Okeowo  (Matrix Solicitors, Abuja, Nigeria) has recently posted on SSRN an article entitled 'Living Will' and the Nigerian Law: The Need for Legislative Intervention.

Here is an abstract of this article:

Withdrawal and limitation of life support in the intensive care unit is common, although how this decision is reached can be varied and arbitrary. Inevitably, the patient is unable to participate in this discussion because their capacity is limited by the nature of the illness and the effects of its treatment. Physicians often discuss these decisions with relatives in an attempt to respect the patient's wishes despite evidence suggesting that the relatives may not correctly reflect the patient's desires.

Advance decisions, commonly known as 'Living Wills', have been proposed in developed countries as a way of facilitating the maintenance of an individual's autonomy when they become incapacitated. Others have argued that legalizing advance decisions is euthanasia by the back door. Some other persons, including my humble self disagree with this submission. A Living Will is not an instrument of euthanasia, but a request in advance to doctors not to give certain medical treatments. In fact, a Living Will, need not block treatment, but could specify that doctors must continue treatment until the patient is dead, regardless of pain or suffering.

In October 2007 in England and Wales, advance decisions became legally binding as part of the 2005 Mental Capacity Act. This has been the case in the USA for many years. The purpose of the present review is to examine the concept of Living Will vis-à-vis Nigerian laws with a view to determining the practicability of same in our jurisdiction.