Wills, Trusts & Estates Prof Blog

Maine adopts Uniform Power of Attorney Act

Pursuant to legislation passed by the 124th Maine Legislature, the state has adopted the Uniform Power of Attorney Act.  See 2009 Me. Legis. Serv. Ch. 292.

Malpractice Outside of Estate Planning Context

Smith v. O’Donnell, 52 Tex. Sup. Ct. J. 52 (Tex. 2009): Executor sued Decedent’s former Attorneys for malpractice in advising Decedent in his capacity as the executor of his wife’s estate.  The lower court ruled in favor of Attorneys basing its judgment on the fact that Decedent’s executor and the estate lacked privity of contract with Attorneys.  The Supreme Court of Texas granted a petition for review without reference to the merits, vacated the lower court’s judgment, and remanded so the lower court could take into account the holding in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780 (Tex. 2006).

On remand, the Court of Appeals began its analysis by holding that Belt was not limited to estate planning malpractice actions.  Accordingly, the court explained that Executor stepped into Decedent’s shoes and could bring whatever malpractice action Decedent could have brought while alive, even if it did not involve the planning of Decedent’s estate.  The court relied on language in the Belt decision which provided that “legal malpractice claims alleging pure economic loss survive in favor of a deceased client’s estate.”  The court then examined the evidence and concluded that although there was no evidence that Attorneys acted with malice or breached fiduciary duties, there was a triable issue as to what damages were attributable to Attorneys’ acts.  The court remanded the case to the trial court to determine whether Attorneys’ acts amount to malpractice.  O’Donnell v. Smith, 234 S.W.3d 135 (Tex. App.—San Antonio 2007).  Attorneys appealed.

The Texas Supreme Court affirmed.  The court agreed with the Court of Appeals that Executor is in the same position as Decedent.  If Decedent had not died, Decedent could have brought the malpractice action and thus Executor may bring the action on Decedent’s behalf.  The court explained that the concerns about third-party malpractice suits (e.g., by disgruntled beneficiaries) do not apply in this type of case as the estate’s suit is the same as the one the client would have brought; the attorney-client relationship is not jeopardized by the attorney considering the impact on a third party.

Note:  The court does not address whether Attorneys’ actions constituted malpractice.

Dissent:  A two-judge dissent asserted that this case falls under the Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996), rule which precludes a malpractice action by a non-client (e.g., an unhappy beneficiary) against the decedent’s attorney for malpractice because of lack of privity.

Moral:  A decedent’s claim for legal malpractice, regardless of whether it involves the planning of the decedent’s estate or some other legal matter, survives and thus may be brought by the decedent’s personal representative.

Book Offers Advice for Dealing With the Loss of a Loved One

Roberta Temes, Ph.D., has published her book entitled Solace: Finding Your Way Through Grief and Learning to Live Again(AMACOM 2009).  In the book,

Dr. Roberta Temes reframes bereavement, as a normal life crisis and necessary healing process. Drawing on the latest research and her decades of counseling experience, she offers psychological guidance, practical advice, and reassurance to every unique bereaved person.  Dr. Temes shares a wealth of information, techniques, rituals, tips, resources, and survivors’ stories to help anyone adjust to the death of a spouse, parent, child, or other significant person in his or her own way.

Trustees Don't Think Helmsley Intended Trust Focus to Be Dogs

I previously reported on the lawsuit to intervene in the administration of the estate of Leona Helmsley. Additional details are below:

• Helmsley established a trust worth around $5 billion that was to be distributed for good cause, showing preference for the care of dogs.
• A judge ruled that the trustees of the trust are free to give money to charitable causes they see fit.
• The Trustees have indicated that they do not believe Helmsley intended for the trust to focus on helping dogs rather than people.

See The Economist, The dog will have his day in court, Aug. 13, 2009.

Special thanks to Adam J. Hirsch (William and Catherine VanDercreek Professor of Law, Florida State University College of Law) for bringing this development to my attention.

Jackson's Death & Questions Regarding Propofol Dosage

The Los Angeles County Coroner ruled that Michael Jackson's death was a homicide resulting from a combination of drugs, including propofol and lorazepam.  The full autopsy and toxicology reports are on security hold.  See Alan Duke, Michael Jackson's death was a homicide, coroner rules, CNN, Aug. 28, 2009.

Meanwhile, some medical experts doubt that 25 milligrams of propofol would be lethal, which is the amount of the anesthetic given to Jackson shortly before his death according to unsealed court records.  Medical experts quoted by the Los Angeles Times suggest that there could be a reporting error or missing information.  "The medical experts said that if the propofol dosage were higher and combined with other medications, it could have led to an overdose."   Kimi Yoshino, Propofol dosage reported in Michael Jackson case is low, experts say, LA Times, Aug. 27, 2009.

And the Winners Are...

The results are in for the Real Property, Trust and Estate Law Section's student writing contest. Congratulations to all of this year's winners!

First-place - Shea B. Airey from the University of South Carolina - "Conservation Easements in Private Practice: A Detailed Overview of the Device and Why It Should Be Embraced by the American Lawyer"

Second-place - Jonathan Ohring from Emory Law School - "Mommy, Where's Daddy (And the Money He Left Me)? A Model for Legislatures and Courts in Determining the Neglected Inheritance Rights of Posthumously Conceived Children"

Third-place - Elliott Joh from the University of Chicago Law School - "Denominations and Denominators: Applying Lucas v. South Carolina Coastal Council to Resolve RLUIPA 'Substantial Burden on Religious Land Use' Cases"

Top SSRN Downloads

Here are the top downloads from June 30, 2009 to August 29, 2009 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	283	Ghosts of 1932: The Lost History of Estate and Gift Taxation Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: July 26, 2009 Last Revised: July 26, 2009
2	184	Protecting Trust Assets from the Federal Tax Lien Bryan Camp, Texas Tech University - School of Law, Date posted to database: June 24, 2009 Last Revised: August 3, 2009
3	111	Jorgensen: A Familiar FLP Story Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: July 6, 2009 Last Revised: July 6, 2009
4	99	Estate Tax on Gift Tax: The Liability Conundrum Bridget J. Crawford, Jonathan G. Blattmachr, Pace University School of Law, Milbank, Tweed, Hadley & McCloy LLP, Date posted to database: June 8, 2009 Last Revised: June 12, 2009
5	72	Estate Planning Implications of the Right of Publicity Paul L. Caron, University of Cincinnati - College of Law, Date posted to database: July 1, 2009 Last Revised: August 19, 2009
6	59	On Estate Tax Repeal and Charitable Bequests David Joulfaian, U.S. Department of the Treasury, Date posted to database: June 5, 2009 Last Revised: June 27, 2009
7	53	Fiduciary Conflicts Steven L. Schwarcz, Duke University - School of Law, Date posted to database: August 1, 2009 Last Revised: August 26, 2009
8	45	The Effects of Donor Standing on Philanthropy: Insights from the Psychology of Gift-Giving Reid K. Weisbord, Peter DeScioli, Government of the United States of America - Eastern District of Pennsylvania, Chapman University Economic Science Institute, Date posted to database: July 16, 2009 Last Revised: August 13, 2009
9	23	2009 Texas Legislative Update: Intestacy, Wills, Trusts, and Related Matters Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: July 23, 2009 Last Revised: July 23, 2009

Slayers: Verdict of Not Guilty by Reason of Insanity Does Not Prevent Forfeiture

In re Estate of Kissinger, 206 P.3d 665 (Wash. 2009): Charged with first degree murder for the slaying of his mother, step-brother, and his mother’s boyfriend, the defendant in In re Estate of Kissinger was found not guilty by reason of insanity.  The mother’s estate received a wrongful death recovery and began a proceeding to determine statutory beneficiaries and argued that defendant was a “slayer” under Washington’s slayer statute.  In In re Estate of Kissinger, a case of first impression, the Supreme Court of Washington held that the defendant was disqualified under the statute which applies to anyone participating in a “wilful and unlawful” killing.  The standard to be used is civil not criminal; “wilful” therefore is to be taken in its everyday meaning and the verdict of not guilty by reason of insanity did not make an unlawful killing lawful.

French Tribunal Will Determine if L'Oreal Heiress was Exploited

Liliane Bettencourt, the daughter of L'Oreal founder and the richest woman in Europe, is the center of a criminal expoitation investigation in France. The details are as follows:

• Bettencourt met Fracois-Marie Banier, a celebrity photograher, over 20 years ago.
• Although estimates differ, Bettencourt appears to have given Banier at least $1.35 billion dollars through gifts, by naming him the beneficiary of life insurance policies, and by promising him artworks upon her death since meeting him.
• Bettencourt's daughter prompted an investigation of Banier when she filed a criminal complaint alleging that Banier was manipulating her mother for financial gain.
• Bettencourt, who is 86, has refused the investigating judge's request for neurological examinations and has asked the French president to intervene.
• Banier will soon face criminal exploitation charges in a French court.

For more information, see Doreen Carvajal, Generous to a Fault?, NY Times, Aug. 21, 2009.

Trust Protectors: Trust Agreement May Create the Protector's Duty

Robert T. McLean Irrevocable Trust v. Patrick Davis, P.C., 283 S.W.3d 786 (Mo. Ct. App. 2009): A trustee and the mother of a beneficiary brought suit against the predecessor trustees and the trust protector alleging that the trustees improperly managed the trust and that trust protector violated his duties.  Finding that the Missouri statutes (identical to Uniform Trust Code § 808) does not define the function and duties of a trust protector, the court turned to the trust document which stated that the trust protector is a fiduciary, is not to be liable to actions taken in good faith, and has the power to remove the trustee.  The court held that the trust language created a duty in the trust protector to exercise the power to remove the trustee sufficient and reversed the lower court’s summary judgment for the trust protector. 

Article Addresses Dilemma of Fiduciary Conflicts

Steven L. Schwarcz (professor of law, Duke) has posted on SSRN his article entitled Fiduciary Conflicts.  The abstract of the article is below:

This article examines the dilemma of a fiduciary acting for parties who, as among themselves, have conflicting commercial interests — an inquiry fundamentally different from that of the traditional study of conflicts between fiduciaries and their beneficiaries. Existing legal principles do not fully capture this dilemma because agency law focuses primarily on an agent’s duty to a given principal, not on conflicts among principals; trust law focuses primarily on gratuitous transfers; and commercial law generally addresses arm’s length, not fiduciary, relationships. The dilemma has become critically important, however, as defaults increase in the multitude of conflicting securities (e.g., classes of securities of the same issuer having different priorities or sources of payment) that are typical of modern finance. A fiduciary, such as a trustee, acting for investors in these securities faces the difficult task of trying to understand and balance the respective obligations owed to conflicting classes and the risk of being sued no matter how the balancing is performed.

The Origins and Future of Sony/ATV

Michael Jackson's share of Sony/ATV is probably the most notable asset in Jackson's estate.  According to Julie Creswell, Turning Music Into Dollars at Sony/ATV, NY Times, Aug. 22, 2009,

Sony/ATV Music Publishing is a joint venture created in 1995 between the Sony Corporation and trusts formed by the late pop giant Michael Jackson.

...

While Sony executives and lawyers for Mr. Jackson’s estate say they see no changes afoot, the structure of the partnership would be altered if the estate put its stake on the block.

Sony would have first-refusal rights if that happens, and company executives say they would be interested in increasing their holdings.

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

Portability of the Estate Tax Exemption in the Taxpayer Certainty and Relief Act of 2009

The August 2009 Real Property, Trusts & Estate Law eReport contains an article by Timothy J. Vitollo entitled The Taxpayer Certainty and Relief Act of 2009. 

The introduction of the article is below:

For more than twenty years, members of the ABA have been trumpeting the estate planning simplification for modestly wealthy taxpayers that would result from portability of the estate tax exemption. Formally recommended by the ABA Tax Section’s Task Force on Transfer Tax Restructuring in 1988 (41 Tax Law. 395), making the estate tax exemption portable would enable a decedent’s surviving spouse to take advantage of any remaining estate tax exemption not utilized by the decedent. While the Taxpayer Certainty and Relief Act of 2009 (S. 722, “TCRA”) has not yet emerged from the Senate Committee on Finance, it provides the clues as to what the final portability provisions might look like.

CLE on Captive Insurance Companies

The ABA section of Real Property, Trust & Estate Law is sponsoring a 90 minute teleconference and live audio webcast CLE entitled "Captive" Insurance Companies and Closely Held Enterprises: Income Tax and Transfer Tax Opportunities and Implicationson Sep. 1, 2009.

The description of the CLE is below:

Once the domain of the Fortune 500, captive insurance companies are now accessible by families and family-owned enterprises. The family business can use a captive to not only reduce casualty insurance costs, but to also defer/reduce income taxes, improve risk management practices, and provide wealth transfer opportunities.

During this presentation, we will examine the following:

• What is a captive?

• Brief tax law history of captives

• Types of casualty risks insurable in a captive

• Income tax treatment of captives

• Jurisdiction (onshore versus offshore)

• Business planning opportunities

• Estate planning opportunities

• Implementation process

• Identifying prospects

• Potential problem areas

Community Property Survivorship Agreements in Texas: Survivorship & Revocation

Community Property Survivorship Agreements: Holmes v. Beatty, 52 Tex. Sup. Ct. J. 967 (Tex. 2009), rehearing filed.

Statement of Survivorship Feature: Husband and Wife held investment accounts with the designation “JT TEN.”  The spouses signed the agreement but did not indicate whether the account had, or did not have, the survivorship feature.  The appellate court held that these accounts did not have the survivorship feature because they did not include an express statement of the survivorship feature as required by Probate Code § 452.

In a significant departure from established Texas law, the court determined that holding community property as joint tenants automatically includes the survivorship feature and that the designation “JT TEN” is an acceptable abbreviation.  In so deciding, the court relied on the common law under which joint tenancies carried with them the survivorship feature.  However, the court disregarded long-established Texas law which requires that the survivorship be expressly stated.  See Probate Code § 46(a) (survivorship in separate or individual property cannot be inferred from the mere fact that the property is held in joint ownership); Probate Code § 452 (requiring community property survivorship agreements to contain an express statement of the survivorship feature); Stauffer v. Henderson, 801 S.W.2d 858 (Tex. 1990) (holding that extrinsic evidence cannot be used to show a right of survivorship for joint bank accounts between non-spouses).

The court bases its conclusion on the allegedly “weaker” language of Probate Code § 452 which does not require the survivorship language to be stated in “substantially” the same manner as provided in the statute as does Probate Code § 439.  The court explains that “[p]recedent, trade usage, and seminal treatises make clear that joint tenancies carry rights of survivorship.” 

Moral:  Community property held as joint tenants automatically has the survivorship feature even if that feature is not expressly stated or intended by the spouses.

Revocation: Husband and Wife owned stocks which clearly stated that the spouses were holding them as joint tenants with rights of survivorship.  However, the spouses did not sign the certificates.  The appellate court held that their failure to sign the certificates resulted in a valid community property survivorship agreement not being created because Probate Code § 452 requires the agreement to be signed by both spouses.

The Texas Supreme Court reversed.  The court explained that the accounts from which the stocks were issued were held as joint tenants and had the survivorship feature.  The only way for the spouses to terminate the survivorship feature was through a subsequent written agreement or to dispose of the assets.  Probate Code § 455.  The mere fact that the stock was issued out of the account in certificate form did not act as a disposition of the property covered by the agreement.

Note that the court rejected the argument that Probate Code § 450 applied to the certificates.  The court pointed to Probate Code § 46(b) which states that survivorship agreements in community property are governed by Part 3 of Chapter XI.  Because § 450 is not in this Part, it is inapplicable to community property survivorship agreements.

Moral:  Merely changing the form in which community property with survivorship rights is held is not sufficient to revoke the survivorship agreement.

IRS to Receive UBS Account Info

As part of a tougher stance on tax havens and tax evaders, a US-Swiss deal will provide information regarding approximately 4,400 suspect UBS accounts to the IRS. 

The IRS is offering a six-month amnesty program during which tax evaders may escape jail time by disclosing taxes evaded and paying back taxes and a penalty. According to the IRS, publicity over the UBS case has lead to hundreds of citizens seeking amnesty under the program, which ends on September 23.

Britain, Germany, and France have been reported to be taking a tougher stance on tax havens as well.

See David R. Francis, Economic Scene: A tougher stance on tax havens, Christian Science Monitor, Aug. 19, 2009.

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

Israelis React to Swedish Article On Israeli Organ Harvesting

A Swedish newspaper article calling for an investigation into claims that Israeli soldiers harvested the organs of dead Palestinians in the 1990's has not been well-received by the Israeli community.

According to the author of the article, there is no proof that the organ harvesting occurred; however, families who suspect that the organs of loved ones were harvested have offered to have the bodies exhumed for investigations. 

Israeli officials have called the op-ed article blatantly racist and have asked Sweden's government to condemn it. 

See Tricia Escobedo, Swedish paper's organ harvesting article draws Israeli outrage, CNN, Aug. 19, 2009.

Indiana Creates Funeral Planning Directive

Indiana has created a procedure for a person to execute a Funeral Planning Declaration.  A statutory form is provided, which allows an individual to designate ceremonial arrangements, grave memorials, and a method of body disposition.  2009 Ind. Legis. Serv. P.L. 143-2009.

Would-be IBM Heiress Waiting for October Hearing

I previously reported on the battle between the estate of Thomas Watson, Jr., former IBM CEO, and Patrica Spado, the female companion that Watson's daughter adopted as an adult as a way to solidify their romantic relationship.  Below are some more details.

• Watson's daughter pursued her adoption of Spado to ensure Spado's financial stability and when the relationship fell apart, she told Spado she would not contest the validity of the adoption.
• The adoption makes Spado a grandchild of Watson, and Watson's grandchildren are the beneficiaries of trusts worth $10 million each.
• While the Maine Supreme Court validated the adoption, Spado is waiting for an October hearing in Conneticut to determine whether Spado is a grandchild for purposes of the trusts.
• According to Spado's attorney, well-established language that excludes adopted adults was not included in the documents establishing the trusts.

See Thomas B. Scheffey, $10 Million Inheritance at Stake in Suit Over IBM Heiress' Same-Sex Adoption, Conn. Tribune, Aug. 21, 2009.

Special thanks to Raymond Sheffield (attorney, Sheffield Law Office, San Jose, CA) for bringing this article to my attention.

Wills: The Benefit of Initialing Each Page

In re Estate of Romancik, 281 S.W.3d 592 (Tex. App.—El Paso 2008, no pet. h.): Testator signed page three of his will but did not sign the prior pages.  The will left his entire estate to Mother.  Wife claimed that Testator’s signature on page three was insufficient to demonstrate that he had testamentary intent with respect to the prior pages.  Both the trial and appellate courts rejected Wife’s claim holding that the document reflected Testator’s testamentary intent.

Moral:  Although not legally required, it may be prudent practice to have the testator initial (sign) each page of the will to demonstrate that the testator intended each page to be a part of his will.