Wills, Trusts & Estates Prof Blog

Another Powerball Winner Comes Forward, Prefers to Remain Anonymous

Mark and Cindy Hill of Dearborn, Mo. were the first to claim their half of the multistate Powerball prize.  Recently, a man who wishes to remain anonymous and his wife claimed their half of the $587.5 million Powerball jackpot.  After speaking with financial advisers, the couple decided to collect $192 million before taxes now to avoid potentially higher taxes in 2013. 

The couple checked their numbers over and over again because they couldn't believe that they won, and they took the whole weekend to try and recover from the shock. 

The man and his wife want to take time to make a solid financial plan and set up a charitable entity to aid causes that he and his wife support.  The anonymous man enjoys his job and has no intention of quitting soon, but lottery officials will not say what he does.

See Arizona Lottery Winner Takes His Half of $588M Now, Not in 2013, msnNews, Dec. 7, 2012.

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

Happy Hanukkah

Greetings,

To all my readers of the Jewish faith, please accept my best wishes for Hanukkah.

Gerry

Article on Testamentary Diposition of Non-probate Assets

Ashley L. Haskins (J.D. May 2012, University of Arkansas at Little Rock) recently published her note entitled Estate and Probate Law--Testamentary Disposition of Non-probate Assets: Whether IRAs are Comparable to Life Insurance Policies and Whether Testators Should Be Able to Change an IRA Beneficiary By Will (Nunnenman v. Estate of Grubbs, 20120 Ark. App. 75, _S.W.3d_.), 34 U. Ark. Little Rock L. Rev. 153-171 (2011).  The introduction to the article is available below: 

Most courts have held that any attempt to change the beneficiary of a life insurance policy by will is ineffectual where the policy "specifies the manner in which the change may be made."  Rather, a policyholder must adhere to the insurance company's procedure for amending a beneficiary designation in order for a modification to be valid.  Contrary to the consensus of a vast majority of the states, Arkansas law recognizes testamentary changes to insurance beneficiaries as long as the insurance policy to be changed is specifically identified, and the testator's intent to change the beneficiary is clear. Arkansas courts, however, have not been confronted with the issue of whether this unique doctrine should be extended to other non-probate assets until recently. Nunnenman v. Estate of Grubbs  considered whether a purported amendment to a beneficiary designation by holographic will effectively changed the beneficiary of an individual retirement account (IRA). 

In Estate of Grubbs, the decedent named Nunnenman as the sole beneficiary of his IRA.  On the account, Nunnenman "was identified by name, social security number, and date of birth."  Two years later, the decedent died following a brief hospitalization. Significantly, days before his death,  the decedent executed a last will and testament that left his entire estate to his mother, Shervena Grubbs. Although the IRA was not specifically referenced in the will, Ms. Grubbs argued she was the rightful beneficiary. She attempted to support her argument by proffering a handwritten note that purportedly changed the beneficiary designation on the decedent's IRA from Nunnenman to Ms. Grubbs. 

The appellate court refused to uphold the testamentary change to the decedent's IRA.  The importance of this case, however, rests in dicta where the court insinuates it would have affirmed the district court's extension of the law for insurance policies to IRAs if the handwritten note had qualified as a valid holographic will. In her dissent, Judge Hart strongly urges that this is inappropriate due to important differences between IRAs and life insurance policies. 

The standard required to validate life insurance beneficiary changes by will seems relatively easy to satisfy: 1) specifically identify the account and 2) ensure that the testator's intent to change the beneficiary is clear.  Allowing testamentary changes to beneficiaries of non-probate assets can lead to many problems, including an increased risk of fraud and unnecessary litigation, which arguably defeats the purpose of non-probate assets. IRAs serve a different purpose than that of life insurance policies; therefore, the court's apparent willingness to directly extend the law applying to life insurance policies was in error. By comparing Arkansas's reasoning with that of other states as well as federal law, this note will show that if the courts wish to allow testamentary changes to IRAs and other non-probate assets, a much more coherent and strenuous test should be applied.  In order to encourage people to comply with company policies regarding beneficiary changes, testamentary disposition of non-probate assets should be the exception rather than the rule.

This note will begin by explaining the relevant reasoning in Estate of Grubbs.  Next, it will discuss the history and general agreement among other states with regard to the testamentary disposition of life insurance policy proceeds. Then, the history of Arkansas's unique approach will be  established, followed by a brief section comparing and contrasting Arkansas law with that of other states.  After that, this note will examine the inherent differences between life insurance policies and IRAs and will argue that such distinctions require IRAs to be treated differently than life insurance policies by not allowing testamentary changes to IRA beneficiaries.  Alternatively, if Arkansas courts choose to allow testamentary changes to IRA beneficiaries, this note will propose that courts should require such changes to meet a more rigorous standard than the current standard used to validate testamentary changes to life insurance beneficiaries. Finally, the note will conclude with a brief summary and restatement of the pertinent issue and arguments.

Overly Attached Girlfriend Big Donor

Provided below is a link to a video from CNN about the Overly Attached Girlfriend. If you have not seen her videos, the Overly Attached Girlfriend is an internet meme about girl who is a little too attached to guy that she's infatuated with that obviously has no interest in her. The young woman who plays her, Laina (last name withheld), was shocked to discover how popular the videos she made portraying the Overly Attached Girlfriend have become. Since she created them, millions of people have seen her videos on Youtube that spoof popular pop songs. Laina changed the words to the songs so it appears as if the Overly Attached Girlfriend had written them. But Laina is more than just a pretty face with a crazy set of eyes, she is also big donor. Through her new found fame, Laina sought to raise money for charity and succeeded.

See 'Overly Attached Girlfriend' A Big Giver, CNN, Nov. 28, 2012.

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

The Creation of Special Needs Trusts

If a parent has a disabled child, that parent might want to consider creating a special needs trusts for their child. The primary reason that a parent might want to take this course of action is because of the expenses that a child is likely to incur from treatment for his or her disability. The costs of caring for a disabled child, even for wealthy families, can be burdensome and drain all of the assets that the family owns. It is important to note that many individuals who have disabilities require long-term care. For the vast majority of people, the costs of long-term care is paid by Medicaid or Social Security. That is why it is important to create a special needs trust. A person is only allowed to have about $2,000 in assets before they are disqualified from taking any of these benefits. The trust will allow a family to supplement the costs of caring for their disabled love one without disqualifying their disabled family member from Social Security or Medicaid. For the parents who are creating the trust, they might want to consider writing a letter to the trustee of the special needs trust. The letter should provide the considerations that the trustee needs to make when making decisions for their child.

The parents of the child can create a special needs trust at any time in that person's life. This might be the case if the disability is discovered later in life. A child with a disability might also be able to make a special needs trust should the person receive a windfall of some sort. The trust acts in much the way as if the parents of the child made the trust. The only difference is that the remainder of the trust gets paid to the government following the death of the child.  

See Tatiana Serafin, Creating Special Trusts For Challenged Kids, Barron's Penta, Dec. 1, 2012.

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

United States Supreme Court to Hear Two Same-Sex Marriage Cases

As reported in Bill Mears, Supreme Court takes up same-sex marriage, CNN, Dec. 7, 2012:

The Supreme Court will tackle the contentious issue of same-sex marriage, agreeing to hear two constitutional challenges to state and federal laws dealing with the recognition of gay and lesbian couples to legally wed.

In a one-page order on Friday, the court took on what will be one of the most important issues in its history. * * *

Oral arguments will likely be held in March with a ruling by late June.

One appeal to be heard involves the federal Defense of Marriage Act or DOMA, which denies federal benefits to same-sex couples legally married in their own state.

The second is a challenge to California's Proposition 8, a voter-approved referendum that took away the right of same sex-marriage that previously had been approved by the state's courts.

See also Jess Bravin, Supreme Court to Hear Gay-Marriage Cases, Wall St. J., Dec. 7, 2012 and Marcia Coyle, Supreme Court to Hear Historic Same-Sex Marriage Cases, The BLT, December 7, 2012.

Petitions the Supreme Court is Watching

Please click here to view the petitions that the Supreme Court is watching for today's conference.  Cases include topics such as the federal antitrust laws, the Defense of Marriage Act (DOMA), and hot pursuit and warrant requirements, among others. The Supreme Court has announced that it will in fact review the constitutionality of DOMA and California's Proposition 8. 

See Petitions We're Watching, SCOTUSblog.com, 2012.  

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

90-year-old Iowa Judge Decides To Retire

The last remaining probate judge in Iowa, District Associate Probate Judge Ruth Klotz, is set to finally retire at the age of 90. Judge Klotz took the job at the age of 74, after a lifetime of helping people with their probate issues.

Judge Klotz began her legal career on the advice of her first husband, an attorney named Earl Fritz. In her last year of law school, she tragically lost her husband. At the time, Judge Klotz was pregnant with the couple's daughter. Without her husband to support her and their daughter, she realized that she needed to finish law school and begin working. She took the bar and began work the following Monday at the Iowa Department of Revenue. She later worked at the Dickerson Law Firm in Des Moines, Iowa where she discovered her love of probate matters. She would later use her new found expertise to manage trusts at Bankers Trust. She soon became the Polk County's "probate referee." She became a judge in 1996 and is still one to this day. She is well-respected among her peers and clearly well-liked. In fact, according to USA Today, "[s]tate lawmakers worked  a special exemption into the law that otherwise would have forced her to stop working at 80." Her approval rating was 96.9% before the last re-election among attorneys in a Iowa State Bar Association survey.

But from Judge Klotz's view, it is time to move on now. She does not know what she will be doing with all of her spare time now and even her daughter notes that leaving her position as a judge will probably be hard for her. The judge is looking at possibly traveling and volunteering. 

See Jeff Eckhoff, 90-Year-Old Iowa Judge Decides To Retire, USA Today, Dec. 4, 2012.

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

Oceanside, California Insurance Agent Sentenced To Jail Time

An insurance agent named Howard Jackson from Oceanside, California pleaded guilty to scamming clients out of $300,000 in a refinancing scheme. Jackson was sentenced to one year in jail and ordered to repay $399,099 to the people that he stole money from. Jackson persuaded his clients "to refinance their homes and invest the proceeds in life insurance policies and a company he was associated with." In his scheme, Jackson would then use the money that his clients invested to pay the first year of premiums on the policies that they purchased and then pocketed the remaining money. His scheme was finally uncovered in 2011 when one of his clients discovered that he had embezzled $80,000 in insurance premiums.

See Oceanside Man Sentenced For Scam: Howard Jackson Bilked Out of More Than $300K, ABC 10News, Dec. 5, 2012.

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

"Dead Ringer" -- New Thriller Based on Body-Snatcher Syndicates on Sale for the Holidays

Amazon has chosen Dead Ringer for their Special Holiday Seasonal Promo and are selling it for just $1.99. See http://amzn.to/VxNnsz.

The following is from the press release for Dead Ringer by Allen Wyler:

While speaking at a Hong Kong medical conference, neurosurgeon Dr. Lucas McCrae slips the cloth off a cadaver’s head during a routine medical demonstration, and is overwhelmed by what’s staring back at him: The face of his best friend, Andy Baer.

Stunned, McCrae races back to Seattle to discover that Andy is in fact missing and may have been murdered by a gang of body snatchers who operate a legit funeral business and make a fortune by selling recovered body parts to medical researchers.

McCrae teams up with an unlikely pair—a beautiful but hardnosed female cop and a gang member whose family was victimized by the cadaver ring—to try and expose a macabre web of corruption that involves law enforcement, politicians, funeral home curators and murdered prostitutes.

Internationally renowned neurosurgeon Allen Wyler takes us deep into a nightmarish scenario, shockingly ripped from recent headlines, to deliver a horrifically plausible, page-turning thriller.

Book on Federal Gift, Estate, and Generation-Skipping Taxes

Lawrence Brody (Attorney, Bryan Cave, LLP), Norman H. Lane (Attorney, GreenbergTraurig), Mary Ann Mancini (Partner, Loeb & Loeb, LLP) recently published a book entitled, The Insurance Counselor, Federal Gift, Estate, and Generation-Skipping Transfer Taxation of Life Insurance, (3d ed., 2012). Provided below is a description from the ABA store:

Now updated and completely revised, this volume in the popular Insurance Counselor series will help you take full advantage of minimizing the transfer taxation of the estate plan as well as avoid the many pitfalls that can arise. The first chapter deals with life insurance as a gift, informing you about the valuation of policies and their qualification for the gift tax annual exclusion. Among the areas discussed are:

• Outright transfers, transfers in trust, indirect gifts
• The uses and issues relating to Crummey powers
• The gift tax marital deduction

Further issues discussed in the second chapter are the gift tax, including consideration of cases when a gift occurs with respect to a life insurance policy, the valuation of the gift, and the availability of the gift tax annual exclusion and the gift tax charitable or marital deduction. The third chapter deals with the estate taxation of life insurance, with emphasis on the two IRC sections that have particular application to life insurance: sections 2035 and 2042. The fourth chapter discusses the generation-skipping transfer tax and its application to life insurance and irrevocable life insurance trusts, while the final chapter specifically addresses important community property considerations.

Citations and case law and the relevant IRC provisions are provided, as well as a table of cases and a table of IRC Sections, Regulations, and Rulings.

CLE on Estate Planning in 2013, Part 2

The Illinois State Bar Association is offering a 1 MCLE Hour teleseminar entitled, TELESEMINAR: Estate Planning in 2013: Part 2, on January 9, 2013 at 12:00-1:00 pm. The keynote speakers at the event are Blanche Lark Christerson, Renee M. Gabbard, Daniel Daniels, and David Leibell. Below is a description and highlights of the event as provided by the Illinois State Bar Association: 

New Year 2013 marks the third consecutive year in which estate and gift tax laws are in a state of substantial flux. Exemption amounts and rates have varied widely and changed unpredictably in the last several years and New Year 2013 is expected to herald substantial new changes again as Congress alters the historically high exemptions and low rates of 2012. For larger and smaller estates, planning must change to reflect changes to the law which will impact more client estates than before. This program will provide you with a practical guide to major changes in the estate and gift tax law in 2013, planning opportunities (and traps) under the new tax regime, and discuss how the new law impacts existing plans. Part 2 of 2.

Highlights

• Growing importance of using defined value clauses in an environment of lower exemptions and higher rates
• Strategies for smaller estates under $2 million
• Advanced gifting strategies – GRATs, installment sales to intentionally defective irrevocable trusts, and more
• Role of sophisticated trust planning under the new law

CLE on Year-End Estate Planning

ALI-CLE presents a telephone seminar and audio webcast entitled Year-End and 2013 Estate Planning Ideas. The CLE will be on Thursday, December 13, 2012 from 12:00 p.m. to 1:30 p.m. Eastern and it is $199.  

Please click here to register. 

Rabbi Arrested for False Insurance Claims in Miami

South Florida authorites recently arrested a rabbi who is facing dozens of charges for false insurance claims.  Barry William Kallenberg was arrested and is accused of one court of organized scheme to defraud and 73 counts of grand theft, false insurance claims and false supporting insurance documents. Allegedly he submitted false insurance claims to American Express and Allianz Global Assistance.  Apparently he would fly in and out of MIA on numerous occasions and then declare that his luggage did not arrive on time.  Surveillance video once caught him picking up his luggage and then later returning to make a claim that the luggage never arrived.  

His fraudulent claims accounted for $30,342.62 in Miami-Dade.  Other claims were outside of the county and lack documentation. He used the money he made from this scheme to make purchases, return the purchases, and then keep the money from the returned merchandise. 

When Kallenberg appeared in bond court on Tuesday, the judge ordered him to surrender his passport and set bond at $110,000.  

See Brian Hamacher, Rabbi Arrested in Miami in Insurance Fraud Scheme: Police, NBC 6, Dec. 5, 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 Louisiana Prenuptial Agreements

Elizabeth Ruth Carter (Assistant Professor, Paul M. Hebert Law Center) recently published her article entitled Louisiana Prenuptial Agreements: Issues for Contemporary Spouses, 42nd Annual Estate Planning Seminar (Oct. 2012).  The abstract availabe on SSRN is below: 

Prenuptial agreements can benefit nearly all couples. The stereotypical second-marriage couple and the couple with a large wealth disparity remain candidates for prenuptial agreements. But, the market is much larger than that. All couples, particularly those in Louisiana, can benefit from a prenuptial agreement. The default legal regime of community property presents a number of likely unintended and unexpected consequences for many spouses. Moreover, modern spouses likely have different concerns than the stereotypical prenuptial agreement candidates. This paper examines important demographic changes among married couples and attempts to identify some possible concerns and scenarios raided by these changes that could be addressed in a prenuptial agreement.

CLE on Estate Planning in 2013, Part 1

The Illinois State Bar Association is offering a 1 MCLE Hour teleseminar entitled, TELESEMINAR: Estate Planning in 2013: Part 1, on January 8, 2013 at 12:00-1:00 pm. The keynote speakers at the event are Blanche Lark Christerson, Renee M. Gabbard, Daniel Daniels, and David Leibell. Below is a description and highlights of the event as provided by the Illinois State Bar Association: 

New Year 2013 marks the third consecutive year in which estate and gift tax laws are in a state of substantial flux. Exemption amounts and rates have varied widely and changed unpredictably in the last several years and New Year 2013 is expected to herald substantial new changes again as Congress alters the historically high exemptions and low rates of 2012. For larger and smaller estates, planning must change to reflect changes to the law which will impact more client estates than before. This program will provide you with a practical guide to major changes in the estate and gift tax law in 2013, planning opportunities (and traps) under the new tax regime, and discuss how the new law impacts existing plans. Part 1 of 2.

Highlights:

• Detailed review of new estate and gift tax law and how it alters current law
• What does the new law mean for planning in 2013 and how does it impact existing plans?
• Planning for the Obama Administration’s transfer tax proposals
• Relationship of new federal law to state estate taxes

Marley's Family Settles In Trademark Lawsuit

The lawsuit between Bob Marley's family and his half brother Richard Booker has come to a close after both parties agreed to settle. The lawsuit began when Marley's family accused Booker and several of his affiliates of violating copyright and trademark laws. More specifically, the family alleged that they had used Marley's image to promote an annual music festival in Miami without the permission of the estate. Following this, Booker responded by filing a counter-suit against Marley's family, claiming that Marley gave him permission to use his likeness before he died. This is what led to the decision to settle the case. According to Booker's lawyer, both parties seem to be satisfied with the settlement agreement. 

See Bob Marley Trademark Lawsuit: Singer's Family Settles Case With Half Brother, Richard Booker, The Huffington Post, Dec. 5, 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 Might Hear New Basic Marriage Case

The Supreme Court is set to add another case on same-sex marriage to its docket. A Nevada law was challenged by eight same-sex couples on 14th Amendment equal protection grounds in Coalition for the Protection of Marriage v. Beverly Sevcik. The lawyer group that is defending the law has asked the Supreme Court to to hear the merits of the case before the Ninth Circuit has the opportunity to hear the case. What makes this case different is the issue that has been presented for the court to decide. The question presented before the court is "must a state allow gays and lesbians to get married?" Of all the cases presented before the court, none of the cases have presented the basic issue on same-sex on whether there is a fundamental right to marry.

The federal district judge, Robert C. Jones, that handled the case affirmed Nevada's ban on same-sex marriage, concluding that past precedent states that there is no fundamental right to same-sex marriage and that the law served a legitimate purpose in protecting the institution of marriage. The judge based his ruling in part on the 1972 Minnesota case, Baker v. Nelson. In that case, the court indirectly upheld Minnesota's statute that limited the right to marriage to different-sex couples. The Supreme Court dismissed the appeal made by the petitioner for lack of a federal question. Judge Jones also determined that if even the courts were to judge the case of the merits, the statute would be able to pass the constitutional muster. 

See Lyle Denniston, Court Gets New, More Basic Marriage Case, SCOTUS Blog, Dec. 5, 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 Special Needs Trusts

Ruthann P. Lacey (Attorney, Georgia and Washington D.C.) and Heather D. Nadler (Attorney, Georgia) recently published an article entitled, Special Needs Trusts, 46 Fam. L.Q. 247-267, (2012). Provided below is the description from the American Bar Association's webpage:

One in twenty-six American families reports raising a child with a disability. Thus, special needs trusts are no longer a concept reserved just for special situations. Family law, elder law, special needs, and estate planning attorneys regularly encounter situations in which good planning centered around an individual with a disability is essential. Special needs trusts are a legal planning tool that enables children and adults with disabilities to more easily become eligible for public benefits while also providing for at least partial reimbursement to the government for some of these benefits. The authors explain the types of special needs trusts and how they can work with regard to public benefit eligibility rules of four of the principal federally-funded programs that provide benefits to the aged, blind or disabled. In addition, the article covers distribution standards, trustee selection and duties, reporting requirements, and attorney liability.

Man Accused of Killing his Mother Could Still Benefit From her Estate

Brett Bednarz is accused of killing his mother and two others two thanksgivings ago, yet he still stands to inherit interest in two houses and cash from his mother's estate.  

Bednarz's mother, Beverley Therrien, died without a will.  Her estate consists of the house where she was killed, another house, and cash totaling about $35,000.  Because there was no will, state law dictates that the estate would be divided equally among her children. Brett's sister was appointed administrator of the estate and has been paying bills to on the two houses. There is one bill remaining unpaid--a $46,877 bill from crime scene cleaners.  The cleaners have filed a lien on one of Beverley's properties.  

If Bednarz is convicted of killing his mother, state law can prevent him from receiving anything from her estate, from receiving any property that he held in joint tenancy with his mother, and from receiving a payout from her life insurance policy.  In order for him to be excluded from all of these shares, an interested party has to raise the claim in the proper court.  Any challenges to the estate would be handled in probate court and a challenge to Bednarz receiving a payout from his mother's life insurance policy would be addressed in Superior Court.  

If Bednarz is acquitted of his mother's murder, he can receive all the benefits that the court finds him entitled to.  

Even though Therrien died without an official will, she drafted one in 2006 and her lawyer applied ot manage the estate and presented a copy of the will.  For a copy of that will to be accepted, someone would have to apply to the court for a hearing and present evidence that the copy should be accepted because the original was accidentally destroyed.  In the 2006 draft, Therrien designated her son as executor and primary beneficiary while excluding her daughter from receiving anything.  

While investigating the homicide, officers found that Therrien had an appointment to meet with her lawyer on December 1, 2010 to cut her son out of her will.  Her lawyer confirmed to the police that he had a meeting scheduled with her that day.  

See David Owens and Christine Dempsey, Accused Killer Could Benefit From Slain Mother's Estate, courant.com, Dec. 1, 2012.  

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