Wills, Trusts & Estates Prof Blog

Article on Digital Life After Death

 John Conner (2012 J.D. Candidate, Texas Tech University School of Law) recently published his article entitled Digital Life After Death: The Issue of Planning for a Person’s Digital Assets After Death, Texas Tech Law School Research Paper No. 2011-02 (2010). The abstract available on SSRN is below:

In “Digital Life After Death: The issue of planning for a person’s digital assets after death,” author John Connor discusses the concept of a digital asset and what happens to these assets when the owner dies. First, Connor lays the foundation to define what a digital asset is and why these assets can create problems in estate planning. Next, the author examines how various social networking sites, e-mail providers, and blog hosting sites are dealing with the concept of digital assets. Connor then provides possible solutions for dealing with digital assets. These solutions include: planning for digital assets prior to death, leaving instructions (including usernames and passwords) on how to access digital assets in the event of death, setting up a trust in which the usernames and passwords can be stored and accessed by the trustee and eventual executor, and possibly providing some information about digital assets in a will. Finally, the author describes the consequences of failure to provide for your digital assets after death.

Dynasty Trusts

More taxpayers are taking an interest in dynasty trusts thanks to the high lifetime gift and estate tax exemptions available until the end of next year. Delaware, New Jersey, and Pennsylvania are just a few of the several states that allow dynasty trusts, or trusts that never expire.

Delaware dynasty trusts offer more flexibility in asset investment options and more protection from creditors during civil litigation. Typically, out of state taxpayers who set up Delaware trusts do not pay state income or capital gains taxes on the trust’s accumulations. Out of state taxpayers only pay these taxes on distributions from the trust. Other states tax out of state taxpayers on the undistributed income and gains of dynasty trusts. Taxpayers must still pay federal taxes on the trust’s distributed and undistributed investment gains and income. Set up costs for a dynasty trust can range anywhere from $3,000 to over $30,000.

For more information on dynasty trusts see Elizabeth Ody, Dynasty Trusts Let U.S. Wealthy Duck Estate, Gift Taxes Forever, Bloomberg, Jul. 28, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) and Peter Parlapiano (MBA/M.S. Personal Financial Planning, Lubbock, Texas)

CLE on Asset Protection Trusts

The American Bar Association is sponsoring a 90-minute teleconference and live audio webcast on August 2 entitled More Than Just Asset Protection: How to Get Other Benefits From Asset Protection Trusts. The program information is below:

This program will address how traditional uses of asset protection trusts can be expanded to provide enhanced services to estate planning clients. Our panelists will focus on the use of completed gift trusts as an estate planning technique in light of PLR 200944002. Attention will also be given to the use of Delaware Incomplete Gift Non-Grantor Trust ("DING") and how such trusts could potentially avoid state income tax. Finally, the panel will discuss how tenancy by entirety property can be preserved and held in a trust structure under Delaware Statutory Tenancy by Entirety Trust ("STET").

Our speakers will provide:

• The basics on the tax consequences of complete and incomplete trusts.
• Expert commentary from the creator of the STET (Delaware Statutory Tenancy by Entirety Trust "STET") and how the STET can be used to provide another layer of protection while preserving the tenancy by entirety in a flexible trust structure.
• Expert commentary from the co-creator of the DING (Delaware Incomplete Gift Non-Grantor Trust "DING") and how the DING's qualification as a nongrantor, incomplete gift trust can benefit your clients.

This program is essential for estate planners ranging from beginner to advanced.

Top SSRN Downloads

Here are the top downloads from May 30, 2011 to July 29, 2011 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	417	Avoid Being a Defendant: Estate Planning Malpractice and Ethical Concerns Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: May 31, 2011 Last Revised: May 31, 2011
2	232	Planning for Same-Sex Couples in 2011 Patricia A. Cain, Santa Clara University - School of Law, Date posted to database: June 9, 2011 Last Revised: June 9, 2011
3	224	Rewards from the Grave: Keeping Loyalty Program Benefits in the Family Gerry W. Beyer, Mikela Bryant, Texas Tech University School of Law, Estate Planning and Community Property Law Journal, Date posted to database: July 8, 2011 Last Revised: July 8, 2011
4	89	Experiential Learning in Trusts and Estates Courses Gerry W. Beyer, Mary F. Radford, Texas Tech University School of Law, Georgia State University - College of Law, Date posted to database: June 24, 2011 Last Revised: June 24, 2011
5	51	Which the Deader Hand? A Counter to the American Law Institute’s Proposed Revival of Dying Perpetuities Rules Scott Andrew Shepard, The John Marshall Law School, Date posted to database: June 5, 2011 Last Revised: June 7, 2011
6	36	The Kennedy Supreme Court Giveth with Footnote 13, But Taketh with Footnote 10: The Department of Labor and Many Lower Courts Miss the Decision's Ultimate Meaning Albert Feuer, Law Offices of Albert Feuer, Date posted to database: June 8, 2011 Last Revised: July 19, 2011
7	35	Rethinking the Intersection of Inheritance and the Law of Tenancy in Common Sarah Waldeck, Seton Hall University - School of Law, Date posted to database: May 15, 2011 Last Revised: May 16, 2011
8	17	The Advance Directive Registry or Lockbox: A Model Proposal and Call to Legislative Action Joseph Karl Grant, Capital University School of Law, Date posted to database: June 6, 2011 Last Revised: June 6, 2011
9	13	Fiduciary Obligations and the Remedial Constructive Trust Beth Nosworthy, University of Adelaide - Law School, Date posted to database: July 19, 2011 Last Revised: July 19, 2011
10	12	'Gen Silent': Advocating for LGBT Elders Nancy J. Knauer, Temple University - Beasley School of Law, Date posted to database: July 12, 2011 Last Revised: July 21, 2011

Judge Rules in Favor of Marvel Comics

In 2009, heirs of the late comic book artist Jack Kirby filed forty-five notices of copyright termination against comic book publisher Marvel Worldwide in an attempt to regain the rights to characters Kirby created in the late 50’s and early 60’s. Kirby’s heirs argued the characters were Kirby’s creations, and Marvel claimed the characters created by Kirby constituted “work for hire.”

Judge Colleen McMahon, a New York federal judge, recently ruled that the rights to Kirby’s creations belong to Marvel Worldwide. Judge McMahon stated, “This case is not about whether Jack Kirby or Stan Lee is the real 'creator' of Marvel characters, or whether Kirby (and other freelance artists [who] created culturally iconic comic book characters for Marvel and other publishers) were treated 'fairly' by companies that grew rich off their labor. It is about whether Kirby's work qualifies as work for hire under the Copyright Act of 1909."

The attorney representing Kirby’s heirs intends to appeal the ruling.

See Judge rules in favor of Marvel in suit brought by Jack Kirby’s heirs, Los Angeles Times, Jul. 28, 2011.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) and Ann Murphy (Associate Professor of Law, Gonzaga University School of Law) for bringing this article to my attention.

New Rules for 401(k) Providers

The Department of Labor has given business owners who sponsor 401(k) plans until next June to demonstrate that the plan used is the best deal possible. Business owners must also itemize the money their employees pay to third-party service providers.

The Department pushed back the effective date for these new rules (originally set for July 16) to April 1, 2012. Vendors and employers have sixty additional days after the start date to roll out their new account statements.

Penalties for failing to itemize fees range from 15% of the plan’s assets to 100% if it takes the company longer than the current calendar year to fix the problem. The plan sponsors must personally pay for any penalties.

See Scott Martin, DOL Begins Crackdown on 401(k) Providers for Fee Bundling Abuses, The Trust Advisor Blog, Jul. 24, 2011.

Prediction for the Current Estate Tax Exemption

Ronald D. Aucutt recently published Capital Letter No. 28, ACTEC, Jul. 25, 2011 on the ACTEC website. In the Letter, Aucutt predicts the future of the current estate tax exemption by taking a look at the history of recent tax legislation. An excerpt from the Letter is below:

In hindsight, the December 2010 legislative experience may have confirmed a few more things about the estate tax. After all, in the House of Representatives, with all the concerns of state and the world to deal with, the sole amendment that was offered and debated dealt with our little estate tax. The proposal to substitute 2009 law for the “deal” was defeated by a vote of 194-233 on December 16, 2010, exactly one year after the Senate had failed to take up the same proposal that the House had passed 225-200. That shift of some thirty votes, coupled with the 277-148 margin (seven votes short of two-thirds) by which the “deal” was then approved by a Democratically-controlled House of Representatives that did not yet reflect the results of the 2010 elections, as well as the 81-19 approval vote in the Senate, could signify, in part, a resignation to substantial estate tax relief. Indeed, the very prominence and intensity of the unsuccessful December 2010 effort in the House to go back to 2009 law could reflect a realization that that vote was likely the last chance to do so.

This leads to the conclusion that Congress is unwilling to incur the political cost of permitting the estate tax to return to a level more burdensome than 2011 law. Even a return to 2009 law would be distasteful. A return to 2001 law would be intolerable. The fact that a return to 2001 law is already the law in 2013 if Congress does nothing means that the pressure to do something to prevent that will be very great. And if Congress does anything, the pressure to maintain an exemption no lower than $5 million (probably indexed for inflation) and a rate no higher than 35 percent will be almost as great. Anything is possible, and surprises seem almost inevitable, but the $5 million exemption and 35 percent rate of current law, themselves a surprise when they were introduced without even a phase-in last December, now have at least a fighting chance of sticking around.

But when will we know? If the debt ceiling deal, either now or in a subsequent phase, really does get broad enough to revisit the “Bush tax cuts,” even the estate and gift tax might be addressed. If not, then it’s hard to see anything happening until next year – perhaps, as almost happened in 2005, right after Labor Day. Otherwise, there is the true last minute, another lame duck session in December 2012. And maybe even overtime action in 2013. Those possibilities, in order of increasing anguish, may also be in order of increasing likelihood.

Leaving Inheritances to Pets and Posthumously Conceived Children

Successfully leaving behind money to pets or posthumously conceived children is a growing request among individuals today. Often times these requests are accomplished through the creation of a trust or by including specific instructions in an estate plan.

Estate planners typically recommend setting up a formal trust to ensure that a pet is properly cared for after the owner’s death. Two types of pet trusts exist, a traditional trust (effective in all states) and a statutory trust (effective in forty-six states plus the District of Columbia). The pet trust can be a living or testamentary trust.Though a living trust can cost between $1,500 and $6,000 to set up, it provides additional protection by ensuring that a pet is cared for in the event the owner is disabled.

When it comes to leaving money to a posthumously conceived child, many estate planners turn to Social Security survivor-benefits cases for guidance on the inheritance rights of these children. The intent of the deceased parent whose genetic material is used posthumously to conceive the child plays a large role in a court’s decision of the child’s inheritance rights. The best way to ensure that a posthumously conceived child will receive his or her inheritance is to specifically state the inheritance and include specific instructions in the estate plan.

See Saabira Chaudhuri, When Estate Plans Fail: Many People Overlook Arcane Issues, from Pets to the Unborn, The Weekend Investor, Jul. 23, 2011.

For more information on planning for your pets, see Gerry W. Beyer & Barry Seltzer, Fat Cats & Lucky Dogs – How to Leave (Some of) Your Estate to Your Pets (2010).

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Fashion Designer Alexander McQueen Leaves £16m to Charities, Family, His Trust, and His Bull Terriers

Fashion designer Alexander McQueen killed himself in 2010, leaving a total of £16m to charities, family, his trust, and his dogs. McQueen gave £100,000 to four charities, £50,000 to both of his two housekeepers, £250,000 to each of his five siblings, and £50,000 each to his godson, nieces, and nephews. McQueen also left £50,000 to his three bull terriers, Minter, Juice, and Callum. A trust for McQueen’s Sarabande charity received the remainder of his estate.

See Alexander McQueen leaves money for dogs to be pampered, BBC News, Jul. 26, 2011; Allyson Koerner, Alexander McQueen Leaves Large Amount of Money to His Dogs, Ecorazzi, Jul. 27, 2011.

For more information on planning for your pets, see Gerry W. Beyer & Barry Seltzer, Fat Cats & Lucky Dogs – How to Leave (Some of) Your Estate to Your Pets (2010).

Singer’s Death Can Cause Record Sales Increase

Many singers’ record sales increase after the singer dies. Record sales for Amy Winehouse, who passed away July 23, have increased since her death, causing her second album to reach the number 9 spot on the Billboard 200 albums chart.

According to MNSBC and Forbes, the record sales for the follow musicians also increased substantially following their respective deaths:

• Elvis Presley
• Michael Jackson
• Ray Charles
• Selena
• Janis Joplin
• Nirvana (Kurt Cobain)
• The Notorious B.I.G.
• Bob Marley
• John Lennon
• Tupac Shakur
• Aaliyah
• Jimi Hendrix
• Frank Sinatra

See Risa Dixon, Celebrities whose deaths increased record sales, Newsday, Jul. 27, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Cleaning the Mess Hoarders Leave Behind

Children of hoarders are often left with the task of cleaning up and shifting through a home filled with possessions after their hoarding parent passes away. A typical clean-up of a hoarder’s home can cost from $5,000 to $20,000 or more depending on regulations regarding disposal of hazardous materials, the condition of the home, and the severity of the hoarding. Typically, the sheer amount of hoarded objects makes finding specific objects of sentimental or financial significance virtually impossible. Clean-ups can last months, requiring the hoarder’s children to take time away from work and forcing them forgo participating in social and family activities.

See Hannah R. Buchdahl, An Unwanted Inheritance: For children of hoarders, the mess remains after the parents pass away, Newsweek, Jul. 26, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Supercentenarians

According to the Gerontology Research Group, only seven people have ever lived past age 115 (only two of those seven lived in the 21st century). Eight of the last nine individuals to hold the title of “world’s oldest living person” were 114 at the time they acquired the title, and all but two were still 114 when they passed on. The two “world’s oldest” title holders who lived past 114 died at age 115. This morbid trend has left many to question why we are failing to get any older.

Though life the expectancy in most countries has increased gradually over the last decades, the global count for people 110 and older (supercentenarians) has leveled off at around 80. In other words, the more individuals who turn 110, the more individuals die at 110. Some scientist believe this age barrier may one day increase, though many scientist agree that individuals who make it past the 110 mark likely owe their supercentenarian status to their genes as opposed to scientific discoveries.

See William Oremus, The World’s Deadliest Distinction: Why aren’t the oldest living people getting any older?, Slate Magazine, Jul. 19, 2011.

Mysterious Tombstone Appears in Dog Park

A tombstone reading "Loving Husband Father and Physician Jeffrey Lang, 1976-2012" appeared in a local dog park in Sherman Oaks, California last week. Nobody knows the exact date the tombstone arrived, and no effort has been made to remove it. No one by the name Jeffrey Lang lives in the area, and the state’s Medical Board has no records of a physician with that name.

See Mystery Tombstone Has Residents Searching For Answers, KTLA, Jul. 26, 2011.

Singer Amy Winehouse Leaves Behind Iron Clad Estate Plan

The body of twenty-seven year old singer Amy Winehouse was found in her London flat Saturday. An autopsy performed two days later proved inconclusive as to the exact cause of death. Though the singer lead a tumultuous life, she left behind a straightforward, iron clad estate plan. Winehouse’s will likely leaves her estimated £10million fortune to her mother Janis Winehouse, father Mitch Winehouse, and brother Alex Winehouse. Missing from the list of beneficiaries is Winhouse’s ex-husband, Blake Fielder-Civil, who is currently incarcerated.

After a ceremony held yesterday for close friends and family of the deceased singer, Winehouse’s body was cremated in North London. After the cremation, Winehouse’s bodyguards (including Andrew Morris, the bodyguard who called for help after finding Winehouse’s lifeless body) posed for a picture with the box containing the singer’s ashes.

See Ron Dicker, Amy Winehouse’s Will: Singer-Songwriter Played It Smart, Daily Finance, Jul. 26, 2011; Cliff Renfrew, Amy Winehouse’s Jailed Ex-Husband Cut Out of Her $16 Million Fortune; Radar Online, Jul. 26, 2011; Sara Nathan and Simon Cable, Amy’s drug-addled ex-husband Blake Fielder-Civil left out of her £10million will, Daily Mail, Jul. 27, 2011; Winehouse’s Bodyguards—Posing with Amy’s Ashes, TMZ, Jul. 26, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Trust Assets Excluded From Cotrustee's Gross Estate

Lester M. Chancellor passed away in 1989 and a portion of his property was placed in a trust established in his will. The cotrustees of the trust were Mr. Chancellor’s wife (Mrs. Chancellor) and a bank. The trust’s terms stated that the cotrustees were authorized to apportion trust income among Mr. Chancellor’s grandchildren, his children, and Mrs. Chancellor during Mrs. Chancellor’s life for their respective needs. The cotrustees also had the power to invade the corpus for the “necessary maintenance, education, health care, sustenance, welfare or other appropriate expenditures needed by” the above named individuals.

From the date the trust was opened and funded to the date Mrs. Chancellor died, she never received or requested any trust corpus. Mrs. Chancellor’s estate’s estate tax did not include the value of the trust assets at the time of her death. The Commissioner’s notice of deficient determined that Mrs. Chancellor’s gross estate included the trust assets because she had a general power of appointment over them.

In Estate of Chancellor v. Commissioner, United States Tax Court No. 7973-09 (July 2011), the court disagreed with the Commissioner, holding that Mrs. Chancellor’s gross estate did not include the value of the trust assets. The court stated that Section 2014 excluded the assets because the trust created an ascertainable standard that served to limit Mrs. Chancellor’s power of appointment over them.

See Associate Editor, Trust assets not includable in decedent's gross estate, Tax Court holds, Wealth Strategies Journal, Jul. 21, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for brining this case to my attention.

Charitable Lead Trusts

Jacqueline Kennedy Onassis created a charitable lead trust, structured to last twenty-four years with annual charitable contributions. In 2018 her heirs will receive whatever money remains in the trust.

Charitable lead trusts work by making annual contributions to charity for a set number of years with any remaining assets passing to heirs potentially free of estate tax. The trusts are created so assets appreciate substantially over time. The use of charitable lead trusts has recently increased, in part due to the gift and estate tax exceptions’ $5 million cap. Record low interest rates have also lead to the resurgent interest in these trusts.

Charitable lead trusts tend to be very confusing, however, and the trust assets are untouchable for the set amount of time. In the early 90’s many of these trusts were deemed failures, partially due to the high hurdle rate (8.4% in August 1994). Today the hurdle rate is 2.2%, increasing the chances that money will remain in the trust for the benefit of the heirs.

For more information on charitable lead trusts, see Paul Sullivan, A Trust Surges, Heirs and Taxes in Mind, but Mind the Details, The New York Times, Jul. 22, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Article on Mortgages and Conservation Easements

Wendy C. Gerzog (Professor of Law, University of Baltimore School of Law) recently published her article entitled Mortgages and Conservation Easements: Not a Good Mix, University of Baltimore School of Law Legal Studies Research Paper (2011). The abstract available on SSRN is below:

This article reviews Kaufman and the Tax Court’s reconsideration of its summary judgment decision that rejected the taxpayers’ deduction for a facade easement charitable deduction. The issues newly considered are the deductibility of the taxpayers’ required cash payments to the charity in connection with obtaining a facade easement charitable deduction and the application of various penalties.

South African Man Wakes Up In Morgue

A fifty-year old South African man woke up in a morgue twenty-one hours after his family reported him dead. The man’s family called an undertaker to take the man to the morgue after he had an asthma attack and appeared dead. The undertaker confirmed the man's death. The man is now back at home with his family.

See South African man thought to be dead wakes after 21 hours in morgue fridge, The Associated Press, Jul. 25, 2011.

Legal Battles Over James Brown’s Estate Continue

Before his death in 2006, James Brown created a trust valued at almost $100 million for the benefit of underprivileged children. In 2009, after years of legal battles between his fourth wife and seven children, the Attorney General created a deal that affirmed Brown’s will but split his estate between his family and the trust (the trust bore the legal expenses).

As a result of pending appeals, however, neither Brown’s family nor the trust have received any money. The trust’s current court-appointed trustee declined to state how much money remained in the trust, citing his fiduciary duty.

See Mat Birkbeck, Years After Death, Battle for James Brown’s Estate Rages On, Rolling Stone, Jul. 20, 2011.

Special thanks to Karen Boxx (Associate Professor of Law, University of Washington School of Law) for bringing this article to my attention.

Remains of Hitler’s Deputy Exhumed, Cremated, and Scattered at Sea

Last Wednesday workers snuck into the cemetery that held the remains of Hitler’s deputy, Rudolf Hess. The workers secretly exhumed the remains, cremated them, and scattered them at sea.

See, Remains of Hitler’s deputy, Rudolf Hess, secretly exhumed and cremated, The Associated Press, Jul. 22, 2011.