Wills, Trusts & Estates Prof Blog

Thursday, November 29: Tax Help Through a Live Chat With Kiplinger Personal Finance Editor

Tomorrow, November 29, from 1 to 2 pm ET, Sandra Block of Kiplinger's Personal Finance will be available for a free live web chat to answer your tax questions! Participants can leave questions at any time before or during the live chat and then they can later go back and access a transcript of the chat.  

Please click here to access the live chat! 

Democrat Max Baucus Supports Maintaining Bush Tax Cuts

As I have previously discussed, farmers and ranchers are worried about the adverse potential effects of allowing the Bush-era estate tax exemption to decrease and the rate to rise. This economic reality and their plight has been heard by members of the Senate who have decided to cross the aisle to support those who could be most affected by the inaction of Congress. For example, Democratic Senator and the Finance Committee Chair Max Baucus has decided to support maintaining the estate tax exemption at $5 Million with the tax rate at 35%. He claimed that he also wants to "maintain a wind production tax credit, which has helped create amount 2,000 jobs in his state." 

See Kevin Robillard, Report: Max Baucus Wants To Preserve Estate-Tax Cut, Politico.com, Nov. 26, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Man Discovers He Married A Woman Who Used To Be Man and Files For A Divorce

In Belgium, a man named Jan married a woman named Monica. After 19 years of marriage to Monica, Jan discovered that the woman he thought he married was actually born a man and had undergone a sex change. Jan felt betrayed because he only recently discovered this. This occurred after a difficult legal battle to even bring Monica to Belgium. When he tried to bring her, the immigration authorities would not allow it because her birth documents seemed to be not authentic. The authorities eventually allowed her entry into the country. 

Jan claims that he had no idea that Monica was originally a man. He reasoned that the reason he had no idea was because that they decided to not have children and that she would fake having a monthly menstrual cycle. He only discovered this after rumors surfaced that she had sex-change operation after he discovered that Monica was receiving "amorous messages" from other men. Once he confronted her about it, he learned the truth from her and became violent. The police were called to subdue Jan. Following this incident, Jan has started annulment proceedings and has opted to seek therapy.

See Bruno Waterfiled, Belgian Discovers His Wife Used To Be A Man After 19 Years, Telegraph, Nov. 26, 2012; see also Sarah Wolfe, Belgian Man Finds Out His Wife Is A Man After 19 Years, GlobalPost, Nov. 27, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

State Court Holds Statute Supersedes Insurance Policy

A case in Colorado involves the insurance policy of Jeffrey M. Johnson. Johnson, now deceased, married Laurel M. Christensen in 2001. He soon purchased a life insurance policy and named Christensen as the primary beneficiary with his mother as the contingent beneficiary. From then, Johnson's mother passed away in 2006 and he and his wife divorced in 2008. At the time of his death, Johnson did not have any surviving heirs. The only family member that survived him was his sister, Dawn Wilson, the current personal administrator of his estate. Shortly after Johnson's death, his ex-wife filed a claim to receive the proceeds from the life insurance policy he purchased. The trial court in this case granted summary judgment against his ex-wife claiming that the divorce removed her rights to his policy. The same court also dismissed her claim to try to reform the beneficiary designation form. The court there held that the applicable statute that could have restored her rights, § 15-11-806, was inapplicable. 

On appeal in Christensen v. Wilson, the Colorado Court of Appeals affirmed the holding of the trial court concluding that the applicable state statute, § 15-11-804(2), not only removed her rights as the beneficiary of the estate but also superseded her insurance policy that stated that only the owner could modify the rights of a beneficiary. The court further contended that the trial court was correct in holding that § 15-11-806 did not apply for three reasons. First, the statute was not applicable because the statute was enacted after Johnson had died. Second, the court concluded that this decision was correct because once § 15-11-804(2) removed her as a beneficiary, "there was no governing instrument for the court to reform." The last reason that the court offered was that § 15-11-804(2) was the only statute that provided remedies to former spouses. In this case, the court concluded that none of the remedies applied to Christensen. 

See In re the Estate of Jeffrey M. Johnson, deceased, Colorado Court of Appeals No. 12CA0191, Nov. 21, 2012.

Special thanks to Patrick Thiessen (Poskus, Caton & Klein, PC) for bringing this article to my attention.

Charlie Sheen Pays Off Lindsay Lohan's Tax Debt

AccountingToday has reported that Charlie Sheen has paid off half of Lindsay Lohan's tax debt or about $100,000 worth of the $233,904 in unpaid taxes for 2009 and 2010.. Sheen first offered Lohan to paid off a portion of her tax debt when the two were filming Scary Movie 5 and Lohan turned down the offer. After Lohan rejected Sheen's offer, she later recanted and accepted his offer. The question that now exists is how this will affect Sheen and Lohan's taxes. If Sheen does not declare the money to be a gift then Lohan will owe about $35,000 in income taxes. If Sheen chooses to declare the money as a gift then he will likely incur a gift tax on the amount in excess of his exclusion. 

See Michael Cohn, Charlie Sheen Pays $100,000 of Lindsay Lohan's Tax Debt, AccountingToday, Nov. 27, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Potential Powerball Winner Might Fare Better Taking Lump Sum

Negotiations in Washington to avert the double blow of expiring tax breaks and automatic spending cuts next year may change how lottery winners choose to accept their money. If somebody has the lucky number to win Wednesday's $500 million Powerball jackpot, the winner might want to take the lump sum of roughly $327 million, before taxes.  Taking the annuity option over a period of 30 years will result in more taxes in the long run.  Regardless of which option a winner takes, the winnings should be enough to last a lifetime if the winners are careful with how they spend and invest the prize. 

See Jonelle Marte, Fiscal Cliff May Clip Powerball Winner, The Wall Street Journal, Nov. 27, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Estate Planning Lessons, Part 5

Larry Hagman is best known for playing J.R. Ewing in the drama, "Dallas".  He also starred in "I Dream of Jeannie".  Hagman passed away earlier this month due to complications with throat cancer.  There are two lessons to be learned from Hagman's death and estate planning. 

First, it is never too early to begin simple estate planning, including a will, advance health directives, and a durable power of attorney.  Hagman drank heavily during his acting career and this required him to get a life-saving liver transplant in 1995.  Not everyone gets a second chance like Hagman did, but this goes to show that it is never too early to start planning because some health events can be immediately fatal.  It is better to have an estate plan in place before it is too late to make one.  

Second, sometimes leaving behind a positive legacy that is not measured in dollars and assets can last longer than leaving possessions behind.  Hagman used his second chance to work with the American Cancer Society and the Kidney Foundation to raise money and awareness. Hagman used his health problems as a way to help others, and this can be an important thing to leave behind. 

See Evan Guthrie Law Firm, Estate Planning: Lessons Learned From Larry Hagman, JDSupra, Nov. 26, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Study on Impact of a Constitutional ban on Same-Sex Marriage in Indiana

Indiana law currently bans same-sex marriage, but in 2011, opponents of same-sex marriage and civil unions passed a proposal to write that ban into the Indiana Constitution.

25 Indiana Law Students investigated the legal consequences that would follow if Indiana wrote a ban on same-sex marriage and civil unions into the state constitution.  Their investigation found that 614 laws would be affected, including probate laws and family laws.  

See Marcia Oddi, Ind. Law-"Opponents of Indiana Ban on Gay Marriage Cite Concerns About Impact on 614 Laws," The Indiana Law Blog, Nov. 27, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Court Says No to Lodha's Petition in Priyamvada Birla Estate Case

In August, the Supreme Court of Kolkata vested control of the Rs 5,000 crore estate of the late Priyamvada Birla to a three-member committee of administrators. Harsh Vordhan Lodha filed a special leave petition challenging that order and the High Court recently dismissed this petition.  The Court held that they found no merit in the petitions, so the administrators will not be allowed to represent the estate and have the rights and powers of a registered member of the Birla Corporation.  The administrators will appraise the asset, be recorded as representatives of the estate, and enjoy the rights and privileges of shareholders.  

See Court Rejects Petition in Birla-Lodha Case, The Hindu Business Line, Nov. 27, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Article on the Expansion of the Future Interest to the Annual Gift Tax Exclusion

William C. Brown (Attorney, Iowa) recently published an article entitled, Judicial Expansion of the Future Interest Exception to the Gift Tax Annual Exclusion – Examination of the Legislative History and Policy Basis for the Future Interest Exception, Tax Lawyer, Vol. 65, No. 3 (2012). Provided below is part of the introduction to his article:

When the Tax Court issued its opinion in Hackl v. Commissioner in 2002, the estate planning community initially stood up and took notice. The case represented a dramatic new line of attack by the Service against one of the best tools in the estate planner’s arsenal—the family limited partnership (FLP). Prior to that time, the Service had principally attacked FLPs with only limited success on the grounds that they constituted transfers with retained interests includable in the donor’s estate under sections 2036(a)(1), 2036(a)(2), and 2038, or as indirect gifts of the underlying assets, without valuation discounts, under substance over form grounds. By and large, the estate planning community had adjusted to these potential attacks by (1) making sure personal assets were not placed in an FLP, (2) advising clients not to use FLP funds to pay personal expenses, (3) meticulously documenting the form of the formation transaction and subsequent transactions with the FLP, (4) retaining sufficient donor assets outside of the FLP to support the donor following the formation of the FLP, (5) not pursuing an FLP strategy for terminally ill donors, and (6) avoiding contemporaneous formation and gifting of FLP units. The Hackl case represented a new threat with which planners needed to deal effectively to assure the maximum benefits available from an FLP planning strategy.

Looking Out For Aging Parents This Holiday Season

Now that the holiday season is upon us, this is an excellent opportunity to ensure that our aging parents are doing well. Sometimes parents would like to re-assure us that they are doing well and that everything is fine. The holidays are an excellent chance to make sure that this is what is actually happening. Unfortunately, in some instances, it is obviously to their adult children that their parents might have lied to them about how well they are doing. 

The purpose of this is to ensure that our aging parents can still maintain their independence. Therefore, the son or daughter of an aging parent might want to look for signs of trouble. For example, they might want to see if their parents have kept up with their bills, the mail, or even the food in their refrigerator. They might also want to check to see if the house that they are living in is still safe for them or if there are any potential falling hazards. If they discovers that their parents can no longer sustain themselves independently, they might want to consider discussing the matter with their parents and begin looking into long term care insurance. Some insurance providers note that the holiday period is the time when insurance policies increase by 15%. 

See Things To Look For When Visiting Aging Parents This Holiday Season, PRNewswire, Nov. 20, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Nate Dogg's Estate Battle Comes To An End

As I have previously discussed, rapper Nate Dogg's wife, LaToya Calvin, and his mother, Ruth Holmes, were in a dispute with his children over who should control the estate. Now, the battle is over and the children have won. Dogg's wife and mother have called it quits in order to avoid conflict with his children. TMZ reported that Calvin withdrew her petition to be named the personal administrator of the estate from the court. The children did not want either his wife or mother to control the estate. Instead, the children wanted an attorney named Alex Borden to take control of the estate. As for who will be in charge of the estate now, that has not been determined.

See Cyrus Langhorne, Nate Dogg's Wife & Mom Give Up, Wave White Flag In Nasty Battle, SOHH.com, Nov. 26, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Judge Perrin Resigns

As I have previously discussed, Judge Perrin, the judge was convicted defrauding an elderly former client of hers. In the aftermath of her conviction, Judge Perrin has decided to resign her post. The Court Service of Ireland confirmed that the judge does indeed intend to resign her post. Perrin could possibly receive a maximum of five years in prison.

See Deception-bid Judge Set to Resign, Wexford People, Nov. 26, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Pet Cemetery Space For Humans

Texas does not allow pets to be buried next to humans in non-pet cemeteries.  But there is no law against burying humans next to pets in pet cemeteries.  As a result, people are now snatching up land in pet cemeteries for themselves--and at a cheaper price too. According to WFAA-TV in Dallas, it costs $8,000 to be buried in a regular cemetery, and it cost only $300 to be buried in a pet cemetery as long as you are cremated first. Some people buy the plots to be close to their pets forever, but other buyers don't even have pets, but are taking advantage of the discounted price. 

See Pet Cemetery Plots for People Becoming More Popular in Texas, AOL Real Estate, Nov. 21, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Estate Planning Challenges With Inheritances in Colorado

Estate planning lawyers in Colorado face a special challenge when they represent a set of parents whose children divorce.  Those parents may not want their hard earned wealth to end up in the hands of a former daughter-in-law or son-in-law.  Since property received by inheritance is separate property, the ex daughter-in-law or son-in-law does not have a claim to that inheritance.  However, any appreciation in the value of an inheritance after it is received is considered marital property and Colorado law dictates that judges divide marital property in an equitable manner between the two divorcing parties.  

One way for parents to help prevent their money from going to a child's ex-spouse is to use a trust instead of an outright inheritance.  A trust can facilitate gradual transfers of wealth to their child as opposed to a lump sum at death, and this lessens appreciation.  

A 2001 Colorado Supreme Court decision threatens this maneuver though because it held that a wife had acquired a vested property interest in a trust set up by her parents at the time she was named beneficiary of the trust even though she didn't receive any money at that time.  

To get around this decision, parents should use trusts that have independent trustees with wide discretion and that designate grandchildren as the recipients of the trust's remaining assets after the children have died.  This setup weakens the argument that the child received an inheritance at the time the child was first named as beneficiary of the trust.  The child can then take the position that he or she only had a mere expectancy right as opposed to a property right.  

See Jim Flynn, Money & The Law: Child's Divorce Can Complicate Estate Planning, Colorado Springs Gazette, Nov. 25, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Wills, Trusts & Estates Prof Blog Named to ABA Journal's Blawg 100!

Thanks to your loyalty and support, I just received notice that this blog was named to the ABA Journal's Blawg 100 for the third consecutive year.

Thank you!!!

In the lines of Dancing with the Stars, I ask for your support for my blog to be a “people’s choice” winner.  The Journal is now conducting a popular vote to determine the most-liked blog in each of a dozen categories – I am in the Niche category.  You may vote by following this link:  http://www.abajournal.com/blawg100,

You do have to register, which is very easy, just provide username, screen name, email, and password.  Then go to the category "Niche" and click "Vote" on my Blog, Wills, Trusts and Estates Prof Blog.

Thanks!!!

Aricle on The Ground Between Facts and Norms

Justin Richland (Associate Professor, University of Chicago) recently published his article entitled Perpetuity As (and Against) Rule: Law, Tradition, Juris-Diction, American Bar Foundation, Chicago, IL (Oct. 17, 2012).  The abstract available on SSRN is below:

“Between facts and norms” is how Jürgen Habermas (1998) describes the mediating place that law occupies and by which it exercises its unique communicative force in state-level societies. But law is not the only discourse that stakes an authorizing claim to that mediating ground. Discourses of tradition, for example, have increasingly been turned to in current indigenous politics as a way to insure that contemporary native governance systems reflect the integration of their particular cultural norms with the vicissitudes of everyday native life in the 21st century. At the same time, both law and tradition, in managing this in-between place, have come under heavy critique for making authoritative representations that are always exceeded by the actual lives and times whose measure they take. This paper is an examination of these claims and critiques as they unfold in the discourses of law and tradition proffered in inheritance dispute hearings before the Hopi Tribal Court between the mid 1990s and 2000s. More specifically I will argue for understanding the authority that law and tradition generate between facts in norms in terms of what I call their perpetuity – that spatio-temporal framing, observable in the details of their actual discourses, by which both law and tradition are alternatively invoked to authoritatively represent the relevant issues of a case at hand. As I show, to the extent that in the Hopi court’s Anglo-style processes the authority of law or tradition are invoked as competing to occupy exclusively the mediating time-space between facts and norms, the quality of law and tradition’s perpetuity can also be understood as a kind of jurisdiction, or juris-diction: discourses of law that call forth the force and limits of legal authority. In conclusion, I will suggest the possibility for extending these understandings beyond the Hopi context by exploring the problems that inheritance disputes generally, and the Rule Against Perpetuities in particular, have long posed for Anglo-American law, suggesting that perpetuities operate at the very heart of that which stands as (and against) rule.

Michigan to Determine the Effect of the Capato Case

As I have previously discussed, the Supreme Court of the United States determined in Astrue v. Capato that court should use the applicable state intestacy law to determine whether a child is considered a "child" of the deceased parent and entitled to benefits. In Michigan, the courts are preparing to hear a similar issue involving in-vitro fertilization. Jeff Mattison, a man with health problems, died in 2001 but not before leaving a deposit in a sperm bank. His wife Pam Mattison, through in-vitro fertilization, conceived twins using his sperm after his death. Following their birth, Pam applied to receive survivor benefits for their children. Social Security denied Pam and her children benefits claiming that the children might not qualify as Jeff's heirs. 

Now, the Supreme Court of Michigan will decide whether to grant benefits to the twin boys. If the high court states that the boys should be entitled to receive benefits, they could receive between $200 and $500 a month.

See State Supreme Court Weighs Heritage of Portage Man, WKZO, Nov. 14, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

New Zealand Member of Parliament Being Investigated in his Dead Mother's Missing Funds

Brendan Horan, a member of the New Zealand Parliament, is indirectly being investigated for misappropriating funds from his mother's bank accounts. According to TVNZ, "forensic accountants are investigating the estate of New Zealand First MP Brendan Horan's mother." At this time, however, the police have not filed a formal complaint against Horan. If the police does grant a formal complaint against Horan, it will not be made until the investigation is complete.

Horan's mother, a million dollar lottery winner, changed her will shortly before she died of cancer. She included a provision that gave the executor the authority to recover money that she loaned or was taken from her. If this does not happen, "then Horan's share of the estate 'will be adjusted to take in account of any such funds received...over the last 10 years.'" When asked about this change in his mother's will, Horan responded that his mother was ill when she changed it. The problem with this is that his mother did receive a medical certificate stating that she was in her right mind when she changed her will.

The executor complied with the forensic accountants and turned over the bank account statements, noting that there is a great deal of money still missing. Horan's mother first won the lottery prize in 1999 worth $1 million in prizes. By 2007, she only had $259,000. At the time of her death she had only $3,000 in her accounts. Horan claims that there is no wrongdoing here. He claimed that he has no financial issues, and that he was unaware that his mother's money was missing. He welcomed the beginning of the investigation in the hopes that it will clear this matter and contends that none his mother's money has been misappropriated. 

See MP's Family Investigates Dead Mother's Missing Funds, TVNZ, Nov. 25, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Top SSRN Downloads

Here are the top downloads from September 25, 2012 to November 24, 2012 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	256	Planning in the Digital Age Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: October 24, 2012 Last Revised: November 12, 2012
2	187	Manipulating the Conduct of Beneficiaries with Conditional Gifts Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: September 26, 2012 Last Revised: September 26, 2012
3	102	Case Law Update Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: September 21, 2012 Last Revised: October 3, 2012
4	93	Another Turn with Turner Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: September 26, 2012 Last Revised: September 26, 2012
5	90	Valuation Discounting and the Lottery Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: November 20, 2012 Last Revised: November 20, 2012
6	81	Justifying Fiduciary Remedies Paul B. Miller, Queen's University (Canada) - Faculty of Law, Date posted to database: October 28, 2012 Last Revised: October 28, 2012
7	72	How the Supreme Court and the Department of Labor May Dispel Myths About ERISA’S Family Law Provisions and Protect the Benefit Entitlements that Arise Thereunder Albert Feuer, Law Offices of Albert Feuer, Date posted to database: September 29, 2012 Last Revised: October 6, 2012
8	61	How to Conduct an Illinois Will Execution Gerry W. Beyer, Eugene Kozob, Texas Tech University School of Law, Unaffiliated Authors - affiliation not provided to SSRN, Date posted to database: October 13, 2012 Last Revised: October 13, 2012
9	58	A Therapeutic Jurisprudential Framework of Estate Planning Mark Glover, Louisiana State University - Paul M. Hebert Law Center, Date posted to database: September 30, 2012 Last Revised: September 30, 2012
10	49	Change We Can't Believe In...Or Afford: Why the Timing is Wrong to Reduce the Estate Tax on the Wealthiest Americans Phyllis Smith, Florida A&M University College of Law, Date posted to database: September 21, 2012 Last Revised: September 21, 2012