Wills, Trusts & Estates Prof Blog

Crummey Trust Successful

Wendy C. Gerzog (Professor of Law, University of Baltimore School of Law) recently published her article entitled FLP Loss But Crummey Win, Tax Notes Vol. 133, No. 9 (2011). The abstract available on SSRN is below:

In Turner the Tax Court determined that section 2036 applied to the decedent’s transfers of assets to his family limited partnership but that the insurance premiums he paid indirectly to his insurance trust qualified for the annual exclusion.

They’re Making a List and Checking it Twice

Just in time for the Christmas season, Anne M. McKinney (Estate Planning Attorney, Knoxville, Tennessee) has created a musical tribute to help individuals remember that their wealthy relatives can, and will, consider the spending habits of the younger generation when making their wills. The video of McKinney’s musical tribute is below:

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

Texas Tech Personal Financial Planning Program Becomes a Department

Texas Tech University will have a standalone Personal Financial Planning department starting in the fall of 2012. Professor Vickie Hampton will become the chair of the new department, and the department will be comprised of twelve full-time faculty and five graduate adjunct faculty members.

The Personal Financial Planning program has grown rapidly over the past ten years. As a department with more research opportunities, the planning group will be able to meet the needs of students more efficiently.

See Danielle Reed, Texas Tech’s Financial Planning Division Graduates to a Department, Financial Planning, Nov. 29, 2011.

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

Progression of The Online Donor

Network for Good, a fund-raising and volunteerism website, charted the evolution of the online donations over the past ten years. A list of how online donations today compare to online donations in 2001 is below:

• Four percent of people gave online in 2001, compared to 65% in 2011
• One-in-ten disaster relief gifts were given to help after September 11, 2001, compared to the one-in-three disaster relief gifts that were given after the earthquake in Japan 2011
• The average online gift in 2001 was $226, while the average online gift in 2011 is $73 (the network notes that “giving has gone mainstream”)
• The amount given through the Network for Good was $3 million in 2001, compared to the $140 million that has been given in 2011
• No one advanced causes through social media in 2011 because the technology was not prevalently used or known; in 2011, 40% of people advance causes through the use of social media

Cody Switzer, Charting a Decade of Online Donations, The Chronicle of Philanthropy, Nov. 23, 2011.

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

Improving Tax and Asset Protection Benefits Rung by Rung

Martin M. Shenkman (Attorney, New Jersey and New York) recently published his article entitled Stairway to Estate Planning Heaven, Wealth Strategies Journal, Nov. 29, 2011. An excerpt for the article is below:

Summary: Led Zeppelin's classic hit has remained popular with boomers as a paradigm for their estate planning. Rung by rung you can improve your tax and asset protection benefits by climbing upward towards estate planning heaven. We'll start at the bottom and work upward.

Father Knows Best Trust.

Coke classic might be great, but not Trust Classic. Most folks have used for a long time in their estate plans. These antiques typically mandate that income be paid out annually, name the beneficiary as a trustee, give the beneficiary in his capacity as trustee the right to distribute money to himself (often limited to an "ascertainable standard" - health, education, maintenance and welfare). Most of these trusts ) pay out trust principal at specified ages, say as 1/2 at ages 25, and the balance at 30. Well, if you think wearing one of those Jim Anderson outfits is fresh, then this is just the type of trust you'd still want in your planning arsenal - Not! If your trust is a model T, don't give up, you might be able to have the trust invest assets into a well crafted limited liability company (LLC) and create a new layer of control and protection. Other corrective steps might be possible. But this is not the kinda trust you want by choice.

Wife Has No Claim Against Husband’s Estate for Husband’s Negligent Death

Mr. Hubley died in a car accident caused by his own negligent driving. Following her husband’s death, Mrs. Hubley made a claim against her husband’s estate for the loss of her husband’s earnings, retirement pension benefits, care, guidance, and companionship she incurred as a result of her husband’s death.

Mrs. Hubley appealed to the Court of Appeal after her claims were dismissed. In Hubley v. Hubley Estate 2011, the Prince Edward Island Court of Appeal agreed with the lower court, framing the issue as being whether Mrs. Hubley was owed a prima facie duty of care by Mr. Hubley to protect himself from injury or death. The court held that finding a duty of care under the situation presented would result in far-reaching policy consequences.

See Paul E. Trudelle, Claim Against Husband’s Estate for Damages Arising from Negligent Death of Husband, Toronto Estate Law Blog, Nov. 29, 2011.

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

Michael Jackson’s Doctor Gets Four Years

Los Angeles Superior Court Justice Michael Pastor sentenced Conrad Murray, Michael Jackson’s doctor, to four years in jail for the involuntary manslaughter of the King of Pop. Judge Pastor declared Murray, 58, an unfit candidate for probation, stating, "He has absolutely no sense of remorse. [Murray] is and remains dangerous…I think Dr. Murray is so reckless that I believe he is a danger to the community."

The court will order Murray to pay restitution to the court in the amount of $800 and restitution to Jackson’s estate and children in an amount yet to be determined. Judge Pastor also ordered Murray to pay the $30 court security fee and a $40 criminal conviction assessment.

The decision of whether Murray will spend his sentence in a 23-hour lockdown cell or with the general jail population is left to the California Department of Corrections.

David Lohr, Conrad Murray Sentenced: Michael Jackson’s Doctor Gets 4 Years in Jail, The Huffington Post, Nov. 29, 2011.

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

Estate Tax as Applied To Nonresident Noncitizens

Bridget J. Crawford (Professor of Law, Pace University School of Law), Troy Lipp (Student, Pace University School of Law), and Jonathan G. Blattmachr (Millbank, Tweed, Hadley & McCloy LLP) recently published their article entitled Estate Taxation of Nonresident Noncitizens: A Primer, Tax Notes, Vol. 132 at 759 (2011). The abstract available on SSRN is below:

This article provides an overview of the U.S. estate tax rules that apply to nonresidents who are not U.S.citizens. The long arm of the U.S. federal estate tax extends to individuals who have assets located in the United States even if the individual is neither a resident nor a citizen of the United States. The statutory framework of subchapter B of chapter 11 of the Internal Revenue Code ode is not well understood, even by specialists. Those Code sections are not taught in most law school courses in federal estate and gift taxation. In light of the staggering staggering amount of foreign investment — $1,245.7 billion of financial assets (excluding derivatives) in 2010 — the estate tax rules governing nonresident noncitizens deserve attention.

Update Beneficiary Designations Now

One of the most important estate planning moves that you can make right now is to update your beneficiary designations for your bank accounts, brokerage firm accounts, life insurance policies, annuities, tax-favored retirement accounts, and company benefit plans.

Significant events in your life such as divorces or changes in the disposition of property that you would like to leave to specific children spur the need for updates. One of the common horror stories is when individuals die after a divorce without changing the beneficiary from their ex-spouse to another desired beneficiary. Even if the will says differently, the money goes to whomever is named on your most recent beneficiary form. It takes little time to update these beneficiary forms, so it is beneficial to make a habit of annually revisiting them to be sure that beneficiaries are appropriately designated.

See Bill Bischoff, Make This Estate Planning Move Now: Failure to Take This Action Can Have Dire Consequences, Smart Money, Aug. 9, 2011.

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

Team Approach To Estate Planning

You can accomplish more effective estate planning with a team approach. Attorneys, accountants, and planners can all work together to be sure that you take full advantage of benefits and avoid costly mistakes.

Though the team approach might be the ultimate goal for thorough estate planning, testators rarely utilize a team of planners. Some wealth management firms offer 10% off of the customer’s next quarterly bill if they will get together with an estate planning team, but the meetings still do not happen as often as the clients would like.

It is important for attorneys to offer clients options for more complex plans and for simple plans that may be more suited to their desires. One of the benefits of having a team of advisors is having several different experts in different areas express concepts from unique angles. Clients are more likely to attach to one of these varied explanations so that they can get the most out of their estate plan.

See Martin Shenkman, Come Together: The Merits of the Team Approach to Estate Planning, Financial Planning Magazine, Sept. 1, 2011.

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

Items from Michael Jackson's Home Set for Auction

On December 17, 2011, Julien’s Auctions, the celebrity memorabilia auction house, will auction off items from the Holmby Hills home where Michael Jackson and his children lived from December 2008 until Jackson’s death in June 2009. The auction is entitled “100 North Carolwood Drive,” and does not mention Jackson by name or use his likeness because the items set for auction were not actually owned by Jackson but were only on lease to the singer.

Though the headboard of the bed in which Jackson died was originally up for auction, Julien’s pulled it from auction at the request of representatives of Jackson’s estate. A list of some of the items set for auction is below:

• A chalkboard with “I (heart) Daddy. SMILE, it’s for free” written on it
• Bedroom chairs with Jackson’s makeup smudged on them
• A mirror on which Jackson himself apparently wrote the words “train-perfection-March April May- full out”
• Antique furnishings
• Paintings
• Sculptures

See Julie Garber, Julien’s Auctions Set to Sell Items from Michael Jackson’s Final Home, Including Death Bed, About.com, Nov. 15, 2011.

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

Push For Mandatory Reporting Law for Elder Abuse in Colorado

Colorado is currently one of only four states without a mandatory reporting law for elder abuse. Charles Carter, an eighty-two year old advocate for the elderly, is pushing for Colorado to pass a law that would require social workers, physicians, and others to report suspected abuse of at-risk adults. Over the last thirteen years, Carter has presented multiple mandatory-reporting bills to legislative committees, but the committees have always killed the bills. In 2005, one bill made it to Governor Bill Owen’s Desk, but the bill was vetoed.

See Sara Burnett, Colorado Advocates Push Mandatory Reporting Law for Elder Abuse, Oct. 24, 2011.

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

Dispute Continues Over Huguette Clark’s Fortune

The majority of Huguette Clark’s fortune is set to pass to an art foundation created under a will the heiress created in April 2005. Under the terms of the will, the foundation will receive Clark’s art collection, rare books, musical instruments and her Santa Barbara, California home. The home will house the foundation.

One of the mysteries surrounding Clark’s estate is the amount of money spent on Clark’s behalf during the last 15 years of her life. During her last fifteen years, Clark never once left her hospital room, and yet her attorney and accountant spent $170 million on Clark’s behalf during this time (averaged to about $1 million a month).

Clark’s heirs have challenged the validity of Clark’s will, and if they succeed in their suit, the twenty-one distant family members will inherit Clark’s wealth. According to new court filings by Clark’s family members, Clark had an earlier will that was dated only six weeks prior to the April 2005 will. This earlier will left Clark’s nurse $5 million and split the remainder of the fortune among family members. Both wills are typewritten and signed by Clark. 

See Bill Dedman, A $400 Million Twist: Huguette Clark Signed Two Wills, One to Her Family, MSNBC, Nov. 28, 2011; Danielle and Andy Mayoras, Mysteries Surround the $400 Million Estate of Huguette Clark, Forbes, Nov. 28, 2011.

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

Should You Own Your Life Insurance Policy?

David Joulfaian (The Department of the Treasury, Washington, D.C.) recently published his article entitled To Own or Not Own Your Life Insurance Policy?, U.S. Dep. of the Treas. (2011). The abstract available on SSRN is below:

Life insurance proceeds are generally subject to the estate tax. An exception is when the policy is owned by the beneficiaries and the insured gives up ownership and control, including the ability to change beneficiaries. Should the insured own the policy contract and potentially subject proceeds to estate and inheritance taxes, or relinquish control, with the beneficiaries owning the policy, and escape such transfer taxes? There is an obvious tradeoff between minimizing bequest taxes and giving up control. This paper addresses how the estate tax influences the choice of life insurance ownership. The evidence from a sample of estate tax returns suggests that those facing high estate tax rates are more likely to forgo ownership and have proceeds excluded from their estates.

Proposed Repeal of the Estate Tax

Forbes proposes that the estate tax should be repealed and that there should be higher and more progressive income tax rates to attempt to improve the nation’s fiscal situation. According to Forbes, the estate tax never generated much revenue anyway, and an income tax increase would be easier to administer. Forbes claims that wealthy people do not die often enough to make the estate tax worth the trouble, and maintains that there there are too many loopholes within the ever-changing laws.

See Matthew Campione, Repeal of Federal Estate Tax Long Overdue, Forbes, Nov. 17, 2011.

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

Loss of Financial Capacity Associated With Dementia

When elderly family members begin to have difficulty handling finances, it can often be one of the initial signs of cognitive decline. Generally, it physicians handle this cognitive impairment, and they are not equipped to be estate planners or financial advisors. There is a big gap in this area of physician’s care to patients with dementia.

The New York Times recommends that doctors and families address these issues early when there is still something that can be done. Doctors should ask questions periodically to assess the mental acuity, specifically questions that probe at financial capacity, and then refer patients to legal experts or money management specialists if the doctor sees a decline. Doctors could also talk to families about signing durable powers of attorney, or having joint bank accounts with their beloved elders.

See Paula Span, When Dementia Drains the Pocketbook, The New York Times, Feb. 28, 2011.

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

Investment Broker Allegedly Misappropriated Jason Taylor's Money

Jason Taylor has filed a lawsuit against Eric Kim to get half a million dollars back.  Kim represented himself to Taylor as an experienced securities investor, so Taylor gave $500,000 to Kim to invest on his behalf. Kim said that he would do so, charging only 10% of the profits that he made.

Taylor says that in an almost two-year period, Kim “misappropriated” over half of the $500,000 that Taylor gave him. Kim’s lawyer denies all claims against Kim and says that Taylor is just another celebrity who gave his money to a friend to invest for him and who is now blaming that friend for poor results.

See Jason Taylor, Investment Broker Ran Off With $275,000 of My Money, TMZ, Nov. 27, 2011.

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this to my attention.

The Uniform Probate Code: Remaking of American Succession Law

The University of Michigan Journal of Law and The American College of Trust and Estate Counsel’s (ACTEC) Legal Education Committee held a symposium entitled The Uniform Probate Code: Remaking of American Succession Law on October 21, 2011. A description of the symposium and a list of the speaker’s and their respective topics are below:

The symposium examined law reform in trusts and estates that has occurred over the past fifty years, with particular focus on the first great success, The Uniform Probate Code. Additionally, it sought to identify and analyze topics that should constitute an agenda for further reform. The symposium was made possible through the generous support of The American College of Trust and Estate Counsel (ACTEC) Foundation and the Bjarne Johnson Memorial Fund.

• Why I Do Law Reform— Lawrence W. Waggoner (Lewis M. Simes Professor of Law, University of Michigan Law School)
• Commentator: Ronald Chester (Professor of Law, New England School of Law)
• The Probate Definition of Family: Is It Time for Judicial Discretion?— Susan N. Gary  (Orlando J. and Marian H. Hollis Professor of Law, University of Oregon School of Law)
• Toward Equality: Nonmarital Children and the Uniform Probate Code—Paula A. Monopoli (Professor of Law and Marbury Research Professor, University of Maryland School of Law)
• Children of Assisted Reproduction—Kristine S. Knaplund (Professor of Law, Pepperdine University School of Law)
• Commentator: Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law)
• The UPC Substituted Judgment Standard for Guardian Decisions – Theoretical Aspirations and Practical Complications—Lawrence A. Froli (Professor of Law, University of Pittsburgh School of Law) and Linda S. Whitton (Professor of Law, Valparaiso University School of Law)
• Family Caregiving and the Law of Succession—Thomas P. Gallanis (N. William Hines Chair in Law, University of Iowa College of Law) and Josephine Gittler (Wiley B. Rutledge Professor of Law, University of Iowa College of Law)
• Keynote Speaker—John H. Langbein (Sterling Professor of Law and Legal History, Yale Law School)
• Commentator: Ira Mark Bloom (Justice David Josiah Brewer Distinguished Professor of Law, Albany Law School)
• Deliberative Accountability Rules in Inheritance Law: Promoting Accountable Estate Planning—Shelly Kreiczer-Levy (Assistant Professor of Law, Academic Center of Law & Business)
• An Economic Analysis of the UPC—Daniel B. Kelly (Associate Professor of Law, University of Notre Dame Law School)
• Commentator: Amy Morris Hess (UTK Distinguished Service Professor and Waller, Lansden, Dortch & Davis and Williford Gragg Distinguished Professor of Law, University of Tennessee College of Law) 
• Fiduciary Duties and Exculpatory Clauses: Clash of the Titans or Cozy Bedfellows?—Louise Lark Hill (Professor of Law, Widener University School of Law)
• Non-Judicial Estate Settlement—John H. Martin (Professor of Law, Ohio Northern University Claude W. Pettit College of Law)

To view video clips from the symposium, click here.

Professor Provides Guidance to ‘The Descendants’

Randall W. Roth (Professor of Law, University of Hawaii) provided information on trusts and the rule against perpetuities to Jim Burke, the producer of The Descendants. The information provided by Roth helped build the film’s plot, as George Clooney’s character must decided what to do with a trust that must be wound down at a particular date following the rule against perpetuities.

The storyline has similarities to the trust issues that surrounded the trustees of Hawaii’s Campbell Estate a few years ago. The 107 year old trust was set to dissolve in January 2007, following the rule against perpetuities and the terms of the trust. Some heirs opted to roll their assets into a new national real estate entity, while others took large cash pay-outs. According to Professor Roth, around six family trusts in Hawaii have faced similar situations in recent years.

While discussing how these estate planning issues were incorporated into the film, Professor Roth said, “I was impressed that Jim [Burke, the producer] and Alexander [Payne, the director] were so concerned about getting the details right, even small details that most people wouldn’t be aware of.”

See Julia Flynn Siler, ‘The Descendants’ Aims to Lay Down the Law in Hawaii, The Wall Street Journal, Nov. 26, 2011.

Sheltering the Estée Lauder Fortune

Ronald S. Lauder, an heir to the Estée Lauder fortune, recently donated his personal artwork, including works by Van Gogh, Cezanne and Matisse, to his private foundation, the Neue Galerie, a museum of Austrian and German art, for display during a charity event. This is not the first time Mr. Lauder, who has a net worth of over $3.1 billion, has donated his art for his private foundation's use. In fact, over the years, Mr. Lauder has qualified for deductions worth tens of millions of dollars as a result of his donating his artwork to the Neue Galerie.

This type of charitable deduction is just one of the sophisticated tax strategies the Lauder heir uses to preserve his fortune. For decades, Mr. Lauder has utilized off-shore trusts and tax-sheltering stock deals to take advantage of numerous tax breaks. Many of the tax breaks favored by Mr. Lauder are the same tax breaks that billionaires like Warren Buffet and Bill Gates claim add to the budget deficit.

For more information on Ronald Lauder and tax breaks available to the super-wealthy, see David Kocieniewski, A Family’s Billions, Artfully Sheltered, The New York Times, Nov. 26, 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.