Wills, Trusts & Estates Prof Blog

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I hope you find this new development helpful.

Top SSRN Downloads

Here are the top downloads from September 1, 2009 to October 31, 2009 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	128	Miller: Effective FLP Line Drawing Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: October 12, 2009 Last Revised: October 12, 2009
2	119	Global Trends and Constraints on Tax Policy in the Least Developed Countries Allison Christians, University of Wisconsin Law School, Date posted to database: August 11, 2009 Last Revised: September 11, 2009
3	113	Section 6694 Preparer Penalties and Tax Advice: The Latest on the Constantly Moving Target Scott A. Schumacher, University of Washington, Date posted to database: September 11, 2009 Last Revised: September 11, 2009
4	105	Conflicts of Interest and Nonprofit Governance: The Challenge of Groupthink Melanie B. Leslie, Cardozo Law School, Date posted to database: September 25, 2009 Last Revised: October 20, 2009
5	99	The Most Esteemed Act of My Life: Family, Property, Will, and Trust in the Antebellum South Stephen Duane Davis II, Alfred L. Brophy, U.S. District Court, Northern District of Alabama, University of North Carolina at Chapel Hill - School of Law, Date posted to database: July 18, 2009 Last Revised: July 18, 2009
6	83	Navigating the Deaccessioning Crisis Derek Fincham, Loyola University New Orleans College of Law, Date posted to database: September 8, 2009 Last Revised: October 22, 2009
7	75	Bill Would Have Far Reaching Effect on Gift and Estate Tax Valuation Jonathan G. Blattmachr, Scott A. Nammacher, Milbank, Tweed, Hadley & McCloy LLP, Author - affiliation not provided to SSRN, Date posted to database: August 24, 2009 Last Revised: August 24, 2009
8	75	Ethical Challenges in Representing Families in Family Limited Partnerships Mary F. Radford, Georgia State University - College of Law, Date posted to database: August 24, 2009 Last Revised: September 28, 2009
9	74	Did a Unanimous Supreme Court Misread ERISA, Misread the Court's Precedents, Undermine Basic ERISA Principles, and Encourage Benefits Litigation? Albert Feuer, Law Offices of Albert Feuer, Date posted to database: October 12, 2009 Last Revised: October 12, 2009
10	73	Alternate Valuation - Now, Perhaps, More Important than Ever Jonathan G. Blattmachr, Alvina H. Lo, Milbank, Tweed, Hadley & McCloy LLP, Credit Suisse Private Banking, Date posted to database: August 25, 2009 Last Revised: August 25, 2009

Is the Prudent Investor Really Prudent?

Stewart E. Sterk (professor of law, Cardozo) has posted on SSRN his article entitled Rethinking Trust Law Reform: How Prudent is Modern Prudent Investor Doctrine?, Cornell L. Rev. (forthcoming).

The abstract of the article is below:

During the 1990s, modern portfolio theory provided the theoretical foundation for significant reforms in trust investment doctrine, reforms that freed trustees from a legal regime in which they faced potential liability for making 'speculative' investments. The reforms enabled trustees to pursue investment policies that protected beneficiaries against inflation risk. But the reforms worked too well: they encouraged trustees to invest a higher percentage of trust assets in equities just in time for a decade that has seen two precipitous stock market declines.

Although no sensible investment strategy would have avoided losses during these periods of market turmoil, the doctrinal reforms endorsed in the Restatement (Third) of Trusts and the Uniform Prudent Investor Act made matters worse. By structuring trust investment doctrine as a regime of vague standards, the UPIA and the Restatement provided trust beneficiaries with little protection against agency costs that would lead trustees to invest too heavily in equities. The current regime would be problematic even if its economic underpinnings - modern portfolio theory and, in particular, the efficient capital markets hypothesis - accurately described economic reality. But market behavior over the last ten years, combined with recent theoretical work, weaken those underpinnings and make the current regime’s bias toward equity investments even more questionable. A legal regime that replaced the current standard-based system with one providing trustees with 'safe harbors' for making investment decisions would provide trustees with more guidance, while simultaneously providing better protection to beneficiaries against excess market risk.

Happy Halloween!

Many law school classes have one or more holidays which are especially relevant.  For example, Family Law has Valentine's Day, Mother's Day, and Father's Day, Labor Law has Labor Day, Environmental Law has Earth Day, Military Law has Memorial Day, and Law and Religion has Christmas, Hanukkah, Ramadan, etc.

Halloween, with its fascination with death, may be the most relevant holiday to those who teach wills, trusts, estates, probate, and estate planning. So, however you celebrate, have fun and be safe!

What to do When a Facebook Friend Passes Away

The following, taken from The Facebook Blog, discusses how to memoralize a friend's account after the friend passes away:

We understand how difficult it can be for people to be reminded of those who are no longer with them, which is why it's important when someone passes away that their friends or family contact Facebook to request that a profile be memorialized. . . . By memorializing the account of someone who has passed away, people will no longer see that person appear in their Suggestions.

When an account is memorialized, we also set privacy so that only confirmed friends can see the profile or locate it in search. We try to protect the deceased's privacy by removing sensitive information such as contact information and status updates. Memorializing an account also prevents anyone from logging into it in the future, while still enabling friends and family to leave posts on the profile Wall in remembrance.

Max Kelly, Memories of Friends Departed Endure on Facebook, The Facebook Blog, Oct. 2009.

Fall AALS Trusts & Estates Newsletter -- Call for Updates

The following message is posted on the request of Prof. Laura Rosenbury, Washington University School of Law:

Hello Trusts and Estates Colleagues,

I am compiling information for the fall newsletter of the AALS Section on Trusts and Estates.  Please email me with news of your or your colleagues’ accomplishments, publications, career moves, service and other professional activities.  We have several hundred Section members; let us know how you're all doing.

Please send your information to lrosenbury@wustl.edu by November 6.  Thanks so much.

Laura

Conflit of Interest Challenges in Governing Nonprofits Organizations

Melanie B. Leslie (professor of law, Cardozo) has posted on SSRN her article entitled Conflicts of Interest and Nonprofit Governance: The Challenge of Groupthink.  

An abstract of the article is below:

The central dilemma for nonprofit law is that nonprofit fiduciaries are not accountable to a principal. Although state and federal governments have authority to enforce directors’ fiduciary duties, enforcement efforts range from minimal to nonexistent. The nonprofit corporation is also free from the market pressures faced by its for-profit counterpart. It is up to boards of directors to police themselves – to ensure that the nonprofit is run effectively and that charitable assets go towards mission and not into the pockets of insiders. Decades of psychological research about group dynamics teach us that “groupthink” can undermine social norms that facilitate good governance procedures. Groupthink occurs when directors place allegiance to fellow board members ahead of the nonprofit’s best interests. Groupthink blinds directors to conflicts of interest, and may also induce directors to refrain from adequately monitoring ongoing business relationships with board members. As a result, conflict of interest transactions often divert charitable assets away from the charities’ intended beneficiaries and into directors’ pockets. Recent nonprofit scandals, such as Yeshiva University’s decision to invest $15 million dollars with Ezra Merkin, the chair of its finance committee, who then quietly entrusted it to Bernard Madoff, demonstrate that charities are uniquely susceptible to groupthink. Because currently, fiduciary duty law is structured as a set of fuzzy standards that appear to sanction self-dealing, the law facilitates groupthink. Restructuring the state law fiduciary duty of loyalty as a set of clear rules would help support good governance norms. A flat prohibition on self-dealing and conflict of interest transactions would be the most effective way to ensure that fiduciaries place the best interests of the nonprofit ahead of self-interest. Short of that, clear directives requiring disclosure of conflicts, investigation of alternatives and proof that inside transactions are clearly below market would do much to counter the damaging impact of groupthink.

Quieting Your Heirs With a No-Contest Clause

The New York Times recently discussed strategies for preventing heirs from challenging a decedent's estate planning documents, focusing on a no-contest clause.

• No-contest clauses threaten disinheritance for making an unsuccessful challenge to the estate planning documents.
• The clause can be an effective deterrent for heirs included in the estate plan and provided with an inheritance large enough not to gamble.
• Most states recognize no-contest clauses, but Florida prohibits them.

Alternatively, the article provides another tactic for extreme cases. "It involves setting up barriers to will contests by signing a series of documents, each only slightly different from the one it replaces, over a period of years. Those who want to contest the plan must then have each of these documents found invalid before they get to the one they want to apply."  Deborah L. Jacobs, Clauses Aimed at Keeping the Heirs Quiet, NY Times, Oct. 28, 2009. 

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

Wal-Mart Offers Caskets and Urns

As of last week, Wal-Mart is offering caskets and urns on its website, although with an appropriately more stringent return policy.  One source indicates that Wal-Mart may eventually offer pet urns and memorial jewelry as well. 

The president of the National Funeral Home Directors Association does not expect Wal-Mart's new product line to affect business, stating that caskets available online have had only a small impact on funeral home business in the past. Ultimately, whether the consumer prefers low prices or the comfort of a funeral home may determine if this prediction is correct.  

See AP, Wal-Mart Selling Caskets, Urns Online, FoxNews, Oct. 28, 2009. 

Using a Special Needs Trust in Elder Estate Planning

According to a recent article from the Academy of Special Needs Planners, an elderly person applying for long-term Medicaid benefits for nursing home care can benefit from a sole benefit trust.  Specifically, when a medicaid applicant transfers assets to a special needs trust for the sole benefit of a person with disabilities, the transfer will not disqualify the applicant from receiving medicaid benefits.  

The article warns, however, that a sole benefit trust is unlike a typical special needs trust because the trust cannot have a remainder beneficiary and must pay out all assets over the special needs beneficiary's actuarial life expectancy.  If the special needs beneficiary is already receiving government benefits through means-based programs, the distributions from the sole benefit trust could very well jeopardize those benefits. 

For more information, see Academy of Special Needs Planners, How a 'Sole Benefit Trust' Can Either Hurt or Help a Person With Special Needs, Oct. 23, 2009. 

Common Myths About A Will

In honor of last week being National Estate Planning Awareness Week, USA Today ran an article setting out to dispel five myths about wills:

1. Estate Planning is for the rich: Not true.  Almost everyone has some property, and estate plans cover more than just assets.  
2. Everything will go to my spouse if I die without a will: Not true in may states that include children in intestate succession schemes.
3. My estate won't go through probate if I have a will: False again.  The probate process validates the will. 
4. I'm all set if I create a will or a living trust: This is only true if you expect no life changes after creating the will or living trust.  Most people experience marriage, divorce, the birth of children, and other changes in personal circumstances.
5. I could be responsible for the debt of my deceased parent: Normally, the estate of the parent is responsible for these debts.

See Sandra Block, 5 myths about wills, and what you should do, USA Today, Oct. 26, 2009.  

Special thanks to Matthew B. Bogin, Esq., for bringing this case to my attention.

Howard Hughes's Heirs Hit by the Real Estate Slump

When Howard Hughes died in 1976, he left behind no will, no children, and nearly 1,000 heirs and beneficiaries. So far, his heirs and beneficiaries have collected $1.5 billion from liquidating Hughes's estate. 

The heirs and beneficiaries were hoping for one final big payout from some real estate in Las Vegas, however,the value of the real estate has dropped considerably and the company holding the real estate has filed for bankruptcy.

For more information, see Kris Hudson, Real-Estate Slump Hits Howard Hughes's Heirs, WSJ, Oct. 23, 2009.

Inheriting a Roth IRA

Here is some advice for handling an inherited Roth IRA, taken from Kelly Greene, The Gift That Keeps on Giving: A Roth IRA, WSJ, Oct. 24, 2009.

• Inheriting a spouse's IRA: You can roll the IRA into your own IRA, avoiding required distributions and receiving credit for the time the IRA was held by your spouse for purposes of withdrawing principal.
• Inheriting a parent's IRA: When children are the beneficiaries of the same IRA, they can split the IRA.
• Titling an inherited IRA: The Internal Revenue Service recognizes this format for retitling the IRA, "'The parent's name Roth IRA/ Deceased 1/1/2001/ FBO (for the benefit of) Name of child as beneficiary.'"

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

Blog Focuses on 2009 Estate Tax Reform

Hani Sarji, an LL.M in Tax candidate at New York Law School, is the author of an informative blog entitled Future of the Federal Estate Tax, which keeps readers up-to-date on the 2009 estate tax reform.  The blog provides information about and links to estate tax bills and relevant articles.  Ann F. Thomas (professor of law, New York Law School) calls the blog promising and timely.

 The blog should keep readers up-to-date until Congress takes final action.

Thank you to Hani Sarji for sharing your research.  We greatly appreciate it!

Immortality and A Super-Rich Species Predicted

American Futurologist Paul Saffo predicts that in the future, the advancements made possible by the fusion of biology and technology will only be available to the super-rich, possibly leading to the super-rich being a different species than their less wealthy counterparts.  

On a related note, an American scientists has predicted that immortality is only 20 years away. 

If these predictions become a reality, estate planning as we know it would likely change.  Until then, this blog will continue to focus on arguably more concrete predictions, such as the future of the federal estate tax. 

See Amy Willis, Rich 'may evolve into separate species,' UK Telegraph, Oct. 25, 2009. 

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

Providing for a Client's Disposition of Tangible Property

The ABA Section of Real Property, Trust and Estate Law is sponsoring a CLE teleconference and life audio webcast on Nov. 10, 2009, entitled Passwords and Personalty: Planning and Pitfalls in the Disposition of Tangible and Quasi-Tangible Property.  

Here is a description of the program.

Do you find the disposition of tangible personal property is an often overlooked aspect of estate planning? The disposition of tangible (and quasi-tangible) personal property often is more important to clients and their family members than other aspects of the planning. If not handled properly, it can lead to more family disputes and will contests than other parts of the plan. Have you considered the financial value of digital assets (such as eBay, PayPal, online gaming sites, etc.) and the mechanisms for pragmatically including them in estate plans?

This program will address: Drafting techniques, client-relations strategies, valuation methods to help promote a conflict-free distribution process, and the disposition of digital assets (e.g., computer passwords, email accounts and social networking profiles).

Astor Trial Could Affect Will Execution

Aside from directly affecting the lives of Anthony D. Marshall and Francis X. Morissey, Jr., the Astor trial could also affect people making a will by causing attorneys to take extra precaution when ascertaining their testamentary capacity.  This could be especially true if there any doubt regarding a client's testamentary capacity.

Marshall and Morissey were convicted of tricking Mrs. Brooke Astor into signing an amendment to her will, despite the generally low capacity required to execute a will.  

See John Eligon, In Astor Trial, a Lesson for Estate Lawyers, NY Times, Oct. 25, 2009.

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

House Maj. Leader Predicts 2009 Estate Tax Will Become Permanent

The following is taken from Corey Boles and Martin Vaughan, Hoyer Supports Permanent Fix for Estate Tax, Wall St. J., Oct. 27, 2009.

House Majority Leader Steny Hoyer (D., Md.) said Tuesday he supports a move to permanently fix the estate tax at 2009 levels and expects it will be adopted by Congress before the end of the year.

The staff on the tax-writing Ways & Means Committee is working on legislation that would set the rate of the tax at current levels. . . . and continue the 2009 estate tax parameters indefinitely. . . . 

The extension would cost the taxpayer $233 billion over the next decade, because currently the federal budget assumes the rate will increase sharply from 2011.

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

Consider donating to a worthy cause by texting this Halloween

The following announcement is posted as a courtesy to Sharon Brand Gardner (Shareholder, Crain Caton, Houston, Texas) who serves on on Board of Trustees of the Houston Gulf Coast/South Texas Chapter the CCFA.

Sharon explains, "Your $5.00 donation would help the 1.4 million American's afflicted with crohn's or colitus..Our goal is to get 200,000 texts by Halloween so please pass this request on to your friends, co-workers, and significant others. We are a small charity but we are gutsy.....Pun intended."

• [Click on the announcement to see a full-size version which is more readable.]

More on Italian Royalty Fight Over Inheritance for Surrogate Children

I recently reported on the inheritance battle between Italian Prince Jonathan Doria Pamphilj and his sister, Princess Gesine.  Both adopted into royalty as children, they now dispute whether Prince Jonathan's children from a surrogate mother are heirs of the Princess and Prince's mother's estate.

A recent article discusses the Italian law at the center of this dispute, providing in relevant part that "the controversial Human Fertility Bill, passed by the Italian Senate in 2004. . . bans single women and homosexual men from access to artificial insemination and outlaws the use of surrogate mothers."  Barbara Davies, Not so happy ever after . . . plucked as babies from an orphanage by an Italian princess, but now they're at war over the family's £1bn fortune, MailOnline, Oct. 24, 2009.

The article also quotes Princess Gesine as stating, "'This is not the usual family squabble over inheritance. I believe I am acting in their best interests, to give these children a secure, legal footing so they know where they stand."  Id.