Wills, Trusts & Estates Prof Blog

The Super Bowl -- Estate Tax Interface

Earlier on this blog, here, here, and here,  I've discussed the considerable family and business strife involved with the Pittsburgh Steelers professional football team.  Now that the Steelers are in the Super Bowl against the Arizona Cardinals, the interface between family-owned football teams and the estate tax has become a topic of increased conversation.

For a very interesting discussion, see Neil E. Hendershot, Steelers and Estate Tax,  PA Elder, Estate & Fiduciary Law Blog, Jan. 30, 2009.

Madoff's destruction of private foundations

By now, most people are aware that Bernard Madoff's schemes cost wealthy individuals a huge amount of money.

But, what is not as often discussed is the impact of his schemes on small private foundations.

Here are some excerpts from  Nicholas Kristof, Madoff and America’s (poorer) Foundations, NY Times, Jan. 29, 2009:

I’ve obtained a list of nearly all the private foundations that invested money directly with Mr. Madoff, at least at the time of their most recent tax filings. Even in the unlikely event that they cashed out since then, they may still have to repay the money to others.

What is staggering is how many of these 147 foundations had all their assets invested with Mr. Madoff and may have been wiped out as a result. For example, the Avery and Janet Fisher Foundation, which supported everything from various museums to meals-on-wheels programs, appears to have been fully invested with Mr. Madoff. And the same is true of dozens more.

The Picower Foundation of Palm Beach, Florida, with nearly $1 billion in assets and a major contributor to non-profits across the nation, has already announced that it will close down because of its Madoff investments. Its beneficiaries have included a neurological research institute at MIT, the New York Public Library and the Children’s Health Fund.

Many non-profit organizations invested with Mr. Madoff and will suffer a double-whammy, losing not only their own savings but also the support of foundations that previously donated regularly but are now broke. And they will also lose some of their individual donors who were invested with Mr. Madoff as well. * * *

I’m posting the list because this is a matter of public concern: These foundations serve the public interest, and if the non-profits that rely on them have been financially crippled we should get a heads up.

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

Zaritsky's Insights on Estate Planning 2009

The following is from an advertisement I received from BNA:

While the über-wealthy may still be sitting pretty upon their vast array of global assets…many of your clients may not be faring so well in the current financial climate.
   

Whether you’re working with those trying to capitalize on their 2008 charitable donations, or average Americans trying to plan for their future, staying up-to-date on every court decision and regulation that impacts estate planning can be a daunting task.  * * *
   

Access estate planning expert Howard Zaritsky’s annual Year in Review, a comprehensive survey of 2008 tax developments for estate planners. This review analyzes all the important 2008 Court decisions and IRS rulings, and also includes:   

• Legislative proposals for estate tax reform in 2009
• A review of the recent family limited partnership decisions and the lessons to be taken from them
• Significant new developments in charitable giving, including charitable trusts
• The new regulations for the generation-skipping transfers
• Sample drafting documents for (1) a family limited partnership, (2) a grantor trust with multiple grantor powers, and (3) a family split-dollar life insurance agreement.

For the complimentary Year in Review whitepaper, register and download here.

Bonds becoming a more popular GRAT funding source

The following excerpts are from Arden Dale, With Stocks Unsure, Bonds In GRATs, Wall St. J., Jan. 29, 2009:

Corporate bonds are making an unusual appearance in a popular form of wealth-transfer trust amid uncertainty over how other assets will fare in the coming year or two.

Low interest rates and slumping asset values have created an excellent environment for grantor-retained annuity trusts, commonly used to transfer wealth without paying gift tax. * * *

Bonds "rarely go into GRATs," but they are a more attractive bet now because they seem less uncertain than traditional equities and perhaps have a greater chance of outperforming a key interest rate * * *

Even as estate planners recommend GRATs and other gifting strategies, they are concerned about possible rule changes under the Obama administration that could take away some of their tax benefits.

For example, rules that let donors reduce taxes by discounting the value of assets in family limited partnerships and limited liability companies are widely expected to change. A new bill in Congress, H.R. 436: Certain Estate Tax Relief of 2009, would eliminate a method often used to reduce the worth of assets in FLPs and LLCs. An appraiser generally sets the value at a lower rate so that the gift will be reduced and less tax will be owed.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this article to my attention.

Lady Helen Ward -- "The" Divorce Attorney

Earlier on this blog, I discussed how billionaire Bernie Ecclestone (president and CEO of Formula One Management and Formula One Administration) is planning to sue his trophy wife, Slavica, for over $100 million in his attempt to recover property he placed in off-shore trusts in her name.  I also mentioned that he hired Lady Helen Ward as his attorney.

Here is some additional about this powerful divorce lawyer from Robert Mendick, Madonna, Guy and the grande dame of divorce, Evening Standard, Jan. 30, 2009:

A workaholic, with a reputation for sending fierce legal letters at three in the morning, Lady Ward has carved out perhaps the most lucrative divorce practice in the world, with a celebrity client list coveted by her rivals. It is an impressive feat for a lawyer whose first words of advice to prospective clients are: "Why do you want to spend all this money getting divorced?"

Incidentally, her title comes through marriage to the Court of Appeal judge Lord Justice Ward, who divorced his first wife in 1982 before marrying Lady Ward a year later.

She is now poised to earn record fees. Her latest client is Bernie Ecclestone, the Formula One grandee, who appointed her last week after dispensing with his previous lawyer. Her task will be to claw back as much as possible of £2 billion that Ecclestone put in an offshore trust in the name of his wife Slavica for tax reasons. The settlement, when it finally comes (sources suggest the case will drag on for at least a year) is expected to be the biggest in history, earning Lady Ward, who charges £500 an hour, huge fees. One rival lawyer suggested she could make as much as £2 million this year alone. * * *

Other clients include Lord Lloyd-Webber, Paloma Picasso, Ian McEwan, Countess Spencer and David Seaman, the former England and Arsenal goalkeeper.

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

Impact of the Marshall decision

Robert M. Harper (Associate, Farrell Fritz, P.C.) has recently published his article entitled The Probate Exception to Federal Jurisdiction, Prob. & Prop., Jan. 2009, at 60.

Here is the introduction to his article:

Until the U.S. Supreme Court’s decision in Marshall v. Marshall, the probate exception to federal jurisdiction perplexed many federal courts and probate practitioners.  Indeed, before Marshall, the extent to which the probate exception barred U.S. courts from presiding over cases involving estates was unclear. This article discusses the Marshall decision and explains how its progeny have developed in the federal circuit courts throughout the country.

Call for Papers -- Rapid publication possible!

The following message is posted on behalf of the Estate Planning and Community Property Law Journal at the Texas Tech University School of Law:

The editors of the Estate Planning and Community Property Law Journal are currently seeking a law review style article (including footnotes) to complete Book 2 of its inaugural volume. It is permissible that the author previously published the article on SSRN or pursuant to a state bar seminar. Although the journal operates out of Texas Tech University School of Law, the article need not be confined to Texas law if it has a broad national appeal.
   

The article can be either academic or practical in nature, the subject matter of which can include: intestate succession, wills, trusts, testamentary substitutes, powers of attorney, inter vivos gifts, powers of appointment, joint tenancies, multi-party accounts, retirement accounts, annuities, life insurance, probate courts, probate proceedings and alternatives to formal proceedings, personal representatives, administrators, executors, trustees, trust and estate creditors, trust and estate beneficiaries, heirship proceedings, fiduciary litigation, income taxation of trusts and estates, federal and state transfer taxes (gift tax, estate tax, and generation-skipping transfer tax), alternative reproductive technologies, guardianships, medical powers of attorney, directives to physicians, anatomical gifts, long-term care insurance, disability income insurance, Medicare, Medicaid, elder abuse, marital property in community property jurisdictions, homestead and similar statutory asset protections, and historical, social, economic, international, ethical, professional responsibility and professional malpractice analyses related issues.
   

Do not miss the opportunity to be published with the only student-led estate planning journal in the nation. Please send all submissions or questions to Leslie.Obinegbo@ttu.edu.

Organ Donor Debate

Earlier today (January 29, 2009), a segment aired on Fox & Friends which focused on whether a person who has agreed to donate his or her organs should have priority for an organ over a person who is unwilling to donate his or her organs.

The debate was between Dave Undis (Executive Director, LifeSharers) and Dr. Robert Higgins (heart surgeon).

You may watch this segment by following this link (about 4:30 in length).

Off Topic -- Worst client ever?

I think Weusi McGowan may qualify as the worst client an attorney could ever have.

Why, you ask?

Weusi was on trial for kidnapping and assault.

On Monday, January 26, 2009, he smuggled a bag of feces (his?) into court and spread them in his attorney's (Jeffrey Martin) hair and on his face.  He then flung the rest at the jurors but his aim was bad so no jurors were hit.

The judge raised Weusi's bail from $250,000 to $1 million.

See AP, Man smears feces on his lawyer, flings it at jury, Newsweek.com, Jan. 28, 2009.

Special thanks to Joel Norris (May 2009 J.D. Candidate, Texas Tech University School of Law) for bringing this article to my attention.

If only it were true ----

This morning, I found the following message in my in-box.  Despite the enticing possibilities, I've decided to keep my "day job."

Hello Friend,
   

This is to notify you again for the last time that you have been listed as an Heir to the total sum of 'Ten Million Six Hundred Thousand Great British Pounds' in the codicil and last testament of the deceased (Name now withheld since this is our second letter to you). Our contact to you is based on the legal fact that you bear the same last name identity with the deceased therefore we can present you as the heir to the inheritance.
   

All legal papers will be processed on your acceptance of this deal. We request that you kindly forward to us your letter of acceptance; your current telephone and fax numbers and a forwarding address to enable us file necessary documents at our high court probate division for the release of this sum of money.
   

Please indicate your interest immediately via my private email for us to proceed. I shall feed you with full details of this transaction upon receipt of your reply towards this proposal.
   

Best Regards,

Mr. Issac Bailey

Tel: +44-703-596-9152

Email: contact.issac(at)rediffmail.com

How a judge copes with making end-of-life decisions

If a person fails to plan properly with a living will, advance directive, designation of a health care agent, or similar technique, the burden of deciding whether to remove life support often falls on a judge.

For a discussion of how one judge copes with this situation, see Veronica Torrejón, Lehigh County judge's panel wrestles with end-of-life decisions, The Morning Call, Jan. 26, 2009, from which the following excerpts are taken:

Everyone dies, but how and under what circumstances are matters Lehigh County Judge Edward Reibman often finds himself pondering.

Not because he's a particularly morbid man. He has the awesome responsibility of making decisions when a person is incapacitated and there's a dispute over who makes end-of-life choices.

In the absence of a living will, Reibman can decide whether someone lives on a respirator in a hospital room or dies at home with friends.

He wrestles with his decisions, wondering if his rulings reflect his own end-of-life preferences or the little he knows about the wishes of the person he's charged with deciding for. * * *

His search for answers led him to convene a panel earlier this month, a talk that those who attended said probably will be the first of many. Reibman called together doctors, lawyers, religious leaders and court-appointed guardians, all charged with helping make decisions for others.

They all agreed on one thing -- the right choices are seldom clear.

Special thanks to Neil E. Hendershot of the Harrisburg, Pennsylvania law firm of Goldberg Katzman, P.C., who also authors the PA Elder, Estate & Fiduciary Law Blog, for bringing this article to my attention.

Drafting to avoid will contests

The American Bar Association Section of Real Property, Trust and Estate Law , General Practice, Solo and Small Firm Division, and the ABA Center for Continuing Legal Education are sponsoring a teleconference and live audio webcast on February 3, 2009 entitled Drafting to Win: How to Win the Will Contest at the Drafting Stage.

Here is a description of the program:

Is your client disinheriting a child?  Leaving assets to a heartthrob?  Any time your client treats a potential beneficiary differently than the potential beneficiary is expecting, you should be prepared for a challenge to a will. Learn what you can do on the front end to defeat challenges to wills from an experienced litigator in this area.  The program will discuss common pitfalls to avoid and provide practical tips to strengthen a will.

This teleconference and live audio webcast will cover the following topics and more:

• What to do during client meetings in the drafting process to help avoid a challenge and to help support the will
• How to avoid mistakes during the will execution ceremony that could cause a challenge to the will or increase the possibility that a challenge might succeed
• What to do after the will execution ceremony to help avoid a challenge and support the will
• How to make time entries clear to support the validity of a will
• The pros and cons of videotaping a will execution

Guardianship CLE

The following is from an announcement I recently received:

The American Bar Association (ABA) Commission on Law and Aging is producing a FREE, one-hour Webcast titled "Why States Should Enact the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (UAGPPJA or Act)." 
   
Experts will cover the following issues:   

(1) Introduction to Guardianship and the Need for a Uniform Law;

(2) Three Key Problems of Interstate Guardianship and How the Act Addresses Them;

(3) How the Act Could Help Reduce Elder Abuse; and

(4) Advocating for State Enactment. 

WHY: Adult guardianships often involve more than one state.  As a result, judges, guardians, and lawyers frequently face questions about which state should have initial jurisdiction, how to transfer a guardianship to another state, and whether a guardianship in one state will be recognized in another.  Lack of clear jurisdictional guideposts can take up vast amounts of time for courts and lawyers, burden family members, exacerbate family conflict, and facilitate "granny snatching" and other abusive actions.  To address these problems, in 2007 the Uniform Law Commission (ULC) approved the UAGPPJA to clarify jurisdiction and provide a procedural roadmap for addressing multi-state dilemmas.   The UAGPPJA cannot work as intended - providing jurisdictional uniformity and reducing conflict - unless all or most states adopt it. 
   

Who Should Participate: Lawyers, judges, legislators and staff, aging and elder abuse network, guardianship practitioners, Alzheimer's Association advocates, and other professionals interested in state legislative reform.
 

Who is Presenting: Professor David English, the ULC's reporter for the UAGPPJA; Eric Fish, Legislative Counsel, ULC; Lori Stiegel, Senior Attorney, and Erica Wood, Assistant Director, of the ABA Commission on Law and Aging.
   

When: Thursday, February 5, 2009 at 2:00 PM Eastern, 1:00 PM Central, Noon Mountain, 11:00 AM Pacific
   

This presentation will be archived and available for viewing for a year on www.abanet.org/aging/guardianshipjurisdiction.
   

How TO PARTICIPATE: http://www.visualwebcaster.com/event.asp?id=55393 * * *
   

This Webcast is supported by the American College of Trust and Estate Counsel Foundation.  The ABA Commission's Joint Campaign for Uniform Guardianship Jurisdiction is also funded by the ABA Section of Real Property, Trust and Estate Law and the Uniform Law Foundation.  See www.abanet.org/aging/guardianshipjurisdiction for more information about UAGPPJA and the Joint Campaign.

Should organ donors have priority as organ donees?

The following excerpts from Chris Joyner, Proposal: Sign a donor card, move up on transplant list, USA Today, Jan. 25, 2009, discuss some of the difficulties faced with organ allocation:

Last fall, for the first time in its history, the national organ transplant waiting list topped 100,000 people, according to the United Network for Organ Sharing (UNOS), the non-profit assigned by the federal government to maintain the list. The list is up to 100,457, and three out of every four are waiting for a kidney. * * *

The growing list of Americans waiting for organs prompted David Undis, president of the non-profit organ donation network LifeSharers, to propose last fall that UNOS reorder the list to give preference to patients who had agreed to become organ donors before their illness. The waiting list is now calculated to give the sickest patients the highest priority.

Undis says only half of the people eligible to become organ donors actually sign up, meaning millions of viable organs are buried with their original owners every year.

Creating "A" and "B" priority lists favoring those committed to becoming organ donors would greatly increase the number of people who sign up to be donors themselves, he says. No one would want to take the chance of ending up on the "B" list, Undis says.  * * *

Six-year-old LifeSharers, based in Nashville, is itself an attempt to create a preferential system in miniature. LifeSharers' 10,000 members all have agreed to donate their organs upon their death, with the stipulation that first priority goes to any LifeSharers member in need.

Undis says the idea has not yet been put into practice because no members have died. Incorporating the LifeSharers model into the national waiting list has not gained much traction with UNOS, which has committees tasked with tweaking the waiting list protocols. * * *

Mark Fox, associate director of the Oklahoma Bioethics Center at the University of Oklahoma-Tulsa, says fixes such as the LifeSharers plan have "inherent logic" to them.

Personally, I think that many European nations have an ever better solution because their laws presume that everyone is an organ donor unless they specifically sign an "anti-donor" card.

Does the splitting of title in trusts give beneficiaries "too good" of a deal?

Kent Schenkel (Associate Professor, New England School of Law has recently posted on SSRN his article entitled Trust Law and the Title-Split: A Beneficial Perspective.

Here is the abstract of his article:

Recent functional analyses of the trust tend to emphasize its effect on the parties to the trust deal and give less attention to the nature of the beneficiary’s interest, especially in relation to persons outside the trust transaction. In contrast, this article takes a critical approach to the trust from the primary perspective of the benefits it provides to beneficiaries. From this perspective, it finds that while the trust maintains the flexibility of a contract it also restricts legal interests of third parties who are strangers to the trust bargain; a feat that contracts are unable to accomplish. These consequences emerge because of the fiction of the trust form, which is that it splits title into “legal” and “equitable” parts. The title-split fiction has proved useful when put to beneficial ends, but at times it allows trust beneficiaries to escape certain important responsibilities of property ownership, causing economic and other distortions. In some cases courts acknowledge that evasion of ownership burdens by trust beneficiaries should be trumped by policy arguments in favor of third-party claimants to trust property; in others such arguments are ignored, and a deductive analysis of the title-split prevails without meaningful inquiry. Historically, trusts were used by the relative few and problems caused by the title-split fiction were sporadic. With trusts becoming more widely-used, a more measured approach to the analysis of a beneficiary’s interest is warranted.

"Legal Education Commons" now online

The following material is posted as a courtesy for Austin Groothuis, Communications/Marketing Coordinator, Center for Computer Assisted Legal Instruction (CALI):

I wanted to let you know about a new CALI resource that may be of interest to your blog readers called the Legal Education Commons (http://www.cali.org/lec).
   

This link should give you some more info:  http://www.cali.org/index.php?fuseaction=pages.news#212

The Legal Education Commons (LEC) is the place to find and share legal education materials including syllabi, podcasts, presentations, and more. Faculty and librarians from CALI member schools can upload materials under a Creative Commons license that allows colleagues and students to find and use the materials.

The LEC also offers access to over 700,000 federal court opinions from the public.resource.org collection. As with other resources in the eLangdell system, these cases can be re-edited and incorporated into course materials.   

Really, LEC is the first step toward the completion of another CALI project with which you and some of your readers may be somewhat familiar: eLangdell (http://www.cali.org/elangdell).

Off topic -- The Famous "Wayne's World" Case

In 1992, United States District Judge James C. Paine authored the famous "Wayne's World" case, Noble v. Bradford Marine, Inc., 789 F. Supp. 395 (S.D. Fla. 1992).

The case is filled with references to phrases popularized by the movie such as "hurling chunks, " "Like a Winged Monkey Flying Out of the Ashes," and "not worthy."

Here are some examples:

The blaze hurled chunks of flaming debris to other vessels, destroying those owned by LYN C. NOBLE NOBLE") and  ROBERT C. MUIR ("MUIR").  * * *

A Schwing and a Miss -- Because of the court's admiralty jurisdiction, MUIR's original Complaint, like his Amended Complaint, provided BRADFORD with a basis for removal. * * *

As a result, PRIME TIME's removal, almost ten months after MUIR commenced suit, is untimely and is a defect deemed "way" improvident. For similar reasons, the court finds that removal of the NOBLE case, which had been remanded, was also untimely. In short, PRIME TIME's most bogus attempt at removal is "not worthy" and the Defendants must "party on" in state court . . .

Bad economy opens doors to estate planning opportunities

The downward spiraling economy has opened the door to some advantageous tax-savings techniques as described in Tough Times Are Good Times to Trim Estates, Wall St. J., Jan. 20, 2009.

Here are some of the strategies discussed in the article:

• low interest loans to family members
• grantor-retained annuity trusts
• direct gifts taking advantage of the lower market values of the gifted property

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

Avoiding Estate Planning Errors

Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law) has recently published his article entitled Avoiding the Estate Planning "Blue Screen of Death" -- Common Non-Tax Errors and How to Prevent Them, 1 Est. Plan. & Comm. Prop. L.J. 61 (2008).

Here is an excerpt from the article's introduction:

Have you ever been using your computer and unexplainably encountered the dreaded “blue screen of death” where work completely disappears and is replaced by a blue screen with white text indicating that an unrecoverable system error has occurred and that you must restart your computer and lose all unsaved data?  If you have, you know the frustration and anger that follows especially because there was nothing you could do to prevent it.  In the estate planning context, a malpractice action can be considered a blue screen equivalent.  Fortunately, unlike the virtually unpreventable computer error, you have the ability to reduce tremendously the likelihood of estate planning “crashes.”

This article discusses the potential liability of estate planners for malpractice, the common non-tax related mistakes attorneys may make while preparing estate plans, and the risky but commonly seen practice of preparing estate plans for both spouses.

A limited number of reprints of this article are available at no charge.  If you are interested in a copy, please let me know.

Happy Lunar New Year!

This year (2009), just like the years 1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997, 2021, and 2033, is the Year of the Ox.

According to GoToHoroscope.com:

The Ox is the sign of prosperity through fortitude and hard work. As one might guess, such people are dependable, calm and modest. Like his animal namesake, the Ox is unswervingly patient, tireless in his work, and capable of enduring any amount of hardship without complaint.

The ox person needs peace and quiet to work through his/her ideas, and when he/she has set his/her mind on something it is hard for him/her to be convinced otherwise. The ox person has a very logical mind and is extremely systematic in whatever he/she does, in spite of a total lack of imagination. He/she can be very stubborn, and difficult to dissuade once he/she decides on something. These people speak little, but are intelligent, and when necessary, they are both articulate and eloquent.

The ox person is not extravagant, and the thought of living off credit cards or being in debt makes him/her nervous. The possibility of taking a serious risk could cause the ox person many sleepless nights. These people are truthful and sincere, and the idea of wheeling and dealing in a competitive world is distasteful to them. It would be right to mention that people born in the ox years are rarely driven by the prospect of financial gain. These people are always welcome because of their honesty and patience. They have many friends, who appreciate the fact that the ox people are rather introverted and wary of new trends, although every now and then they can be encouraged to try something new. It is important to remember that the ox people are sociable and relaxed when they feel secure, but occasionally a dark cloud looms over such person and he/she takes on the worries of the world and tries to find solutions.