Wills, Trusts & Estates Prof Blog

Recent Case Involving a No Contest Clause

Clause not enforceable after the testator’s estate is closed.  The testator devised real property to his children for life, remainder to the last surviving child. His will included a no contest clause and a prohibition on any of the life tenants commencing a partition proceeding.  More than 20 years after testator’s death, two of the children began a partition action which was dismissed.  Two other children then brought a declaratory judgment action to enforce the no contest clause.  The trial dismissed and the Nebraska Supreme Court affirmed, holding that the partition action could not be a will contest because it was filed after the estate was closed.  Martin v. Ullsperger, 822 N.W.2d 382 (Neb. 2012).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

Record Number of Transfers Made In Anticipation of Future Tax Changes

As 2012 comes to a close, the number of people making transfers of wealth has reached record setting numbers, according to some financial professionals. According to the Memphis Business Journal, "A New York wealth planning principal told CNN Money he expected the volume of money gifted in 2012 will be three to four times more than has ever been given away in any other year; another estate planning professional estimated the volume would exceed the combined amounts given away in the previous 10 years."

See Tax Changes Spur Record Transfers of Wealth, Memphis Business Journal, Dec. 17, 2012.

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

Supreme Court Set Deadlines For Windsor Case

As I have previously discussed, the Supreme Court of the United States has agreed to hear several same-sex marriage cases, including Windsor v. United States. This past Friday, the Supreme Court established a schedule for filing the written arguments in Windsor. Briefing is suppose to begin January 22 for BLAG, the group defending the Defense of Marriage Act (DOMA). There are two basic issues that the Court will be addressing in the Windsor case. The first issue deals with whether § 3 of DOMA violates the equal protection clause of the 14th Amendment. The second issue that the Court will hear is whether the Court has jurisdiction to hear the case.

Windsor must submit her brief by February 26, 2012. BLAG's brief on behalf of the federal government must be submitted by February 22, 2012. The reply brief is due no less than seven days before oral argument is to be held. This brief will discuss the merits of the case. On the jurisdictional issue, all parties must submit their briefs to the Court by February 20, 2012. The Court has not set a date for oral arguments, however, the court will probably hear oral arguments in March after the both parties have submitted their briefs.

See Lyle Denniston, Same-sex Marriage Briefing Set (UPDATED), SCOTUSblog, Dec. 14, 2012.

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

Request for your vote

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I now respectfully ask for your support for my blog to be a “people’s choice” winner.  The Journal is 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.

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Feel free to have your colleagues, your relatives, and your friends cast a ballot.  They do not need to be lawyers, law students, etc.  Voting is open to everyone!

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Jazz Legend's Secret Daughter

Louis Armstrong, known as the Father of Jazz, also fathered a daughter that no one knew he had. The discovery came as a bit of shock. While Armstrong was a known womanizer, many believed that he passed away without children. The discovery would come 42 years later when his daughter came forward with letters that Armstrong wrote to her mother. In the letters, Armstrong inadvertently revealed how we kept a second family. 

His daughter, 57-year-old Sharon Preston-Folta, claimed that she came forward with the letters because she wanted to story to be known. While many other sources confirmed that Armstrong died without any children, these letters reveal that he supported Ms. Preston-Folta and her mother for about 16 years. In several of the letters, he promised his mistress, Ms. Preston, that he would continue to support her and their daughter. He even bought them a house and would visit them regularly. Her mother stated that she not want to report her daughter because she felt that Armstrong recognition of her as her daughter was enough. As a result, her mother never came forward when his estate was being probated. Armstrong's widow rejected claims that Armstrong ever fathered children, claiming that the late-jazz legend was not able to father children. Ms. Preston-Folta stated that her parents relationship ended in 1967 because Armstrong refused to marry her mother.

See Jacqui Goddard, Louis Armstrong's Secret Daughter Revealed, 42 Years After His Death, The Telegraph, Dec. 15, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) and Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Article on Charitable Insolvency and Corporate Governance

Reid K. Weisbord (Assistant Professor, Rutgers University School of Law-Newark) has recently published an article entitled, Charitable Insolvency and Corporate Governance in Bankruptcy Reorganization, (forthcoming 2012). Provided below is the abstract from SSRN:

Poor corporate governance is pervasive in the charitable nonprofit sector and, in numerous cases, mismanagement and abuse have led to the financial distress or failure of charitable nonprofit firms. The rich literature on nonprofit law has considered the need for better corporate governance and enforcement of fiduciary duties, but the scholarship has yet to address the implications of financial distress and insolvency on corporate governance. This Article fills that void and argues that, when a charity encounters financial distress and approaches the point of insolvency, features of nonprofit and bankruptcy law tend to exacerbate rather than ameliorate the corporate governance problem. In particular, charitable insiders who breach their fiduciary duties are in a better position to entrench themselves and avoid termination than their for-profit counterparts. In the for-profit sector, three constraints tend to regulate corporate governance by helping oust fiduciaries responsible for financial distress: (1) bank monitoring of commercial loan covenants; (2) absolute priority and the transfer of ownership in bankruptcy; and (3) involuntary bankruptcy proceedings. In the nonprofit sector, however, those constraints are either less effective or do not apply. As a result, blameworthy charitable fiduciaries are better able to entrench themselves and, absent new leadership, financially distressed charities are less likely to achieve a full and sustainable financial recovery. This Article suggests that the law might better protect the public interest in charitable assets from waste and abuse by presumptively appointing bankruptcy examiners in all Chapter 11 reorganization proceedings involving substantial charitable assets. Once appointed, bankruptcy examiners would be tasked with identifying the cause of insolvency and individuals responsible for the charity’s financial distress.

Hearing in Thomas Kinkade Case Reset

A probate court hearing between the attorneys for the Thomas Kinkade estate and the late painter's girlfriend has been continued until December 24.  The Santa Clara County Superior Court Judge Thomas Cain originally set the hearing for December 3.  

The hearing will attempt to sort out who gets to keep personal property contained in the home.  The Kinkade estate currently does not have access to the home in question.  Judge Cain has asked both parties to submit a list of the items for possible removal.  The painter's holographic handwritten wills are still unresolved, and Judge Can is being asked to rule on Kinkade's wills or codicils.

See Sheila Sanchez, Thomas Kinkade Estate, Girlfriend Probate Hearing Rescheduled for Dec. 24, LosGatosPatch.com, Dec. 17, 2012. 

CLE on the Estate and Gift Tax Audits

The Illinois State Bar Association is offering a 1 MCLE Hour teleseminar entitled, TELESEMINAR: Estate and Gift Tax Audits - A National Perspective, on January 29, 2013 at 12:00-1:00 pm. The keynote speakers at the event are Keri D. Brown and Jennifer Pratt. Below is a description and highlights of the event as provided by the Illinois State Bar Association:

Every estate and gift tax return is reviewed by hand by IRS personnel and the agency continues to become more aggressive in challenging returns. Being chosen for examination can be a very time-consuming and costly process, putting a premium on understanding the process and preparing for the exam. It also highlights the value of understanding audit triggers and how returns are selected for exam in a bid to avoid audit in the first instance. This program will provide you with a practical guide to estate and gift tax audits, including audit triggers and how to reduce the risk of an exam, preparing for and advocating for a client once their estate is selected for audit, crucial attorney-client, evidentiary and statute of limitation concerns, and much more.

Highlights:

• Successfully defending estate and gift tax audits
• Avoiding audit in the first place – understanding audit triggers and how returns are selected for examination
• Practical guide to the audit process, timeframes, and deadlines
• Common issues on audit – FLP/FLLCs, defined value clauses, insurance policies and lifetime gifts
• Documentary preparation for an exam and drafting effective settlement proposals
• Important attorney-client privilege, statute of limitation, and evidentiary considerations

France's New Inheritance Laws

Here is a summary of the new rules that the European Union (EU) instituted this past August. In particular, here is how the rules will apply to French citizens living in the United Kingdom (UK) and how English law will apply to the estates of English citizens living in France.

The new regulations will only apply to transfers made at death by succession. The basic rule for succession is that the law of the country where the deceased has his habitual residence at the time of his or her death applies to the decedent's will, regardless of where the decedent estate is located at the time of his or her death. On the other hand, if a person's property is more closely related to another country then the laws of that particular country will apply. A person can also choose which law will apply, but the person is limited to a choice between the country of their natural origin or their habitual residence. It is important to remember that these succession laws do not apply to tax matters. Tax matters, at least in France, are determined by national law. This law might apply to trusts if it deals with a succession issue. This could become problematic in France. 

There is also an issue that deals with time. For an explanation please visit the website that is provided below. These new regulations will apply to all member of the EU, with the exception being the United Kingdom (UK). The reason is because the UK did not adopt these regulations. A solicitor might want to take note of the following scenarios:

1. An English citizen dies as a resident of France and decides to have English law apply to his or her entire estate. Here, the administration of his estate will be governed by English law.
2. A French citizen dies in England and decides to have French law apply to his estate. Here, a decedent's worldwide movable property and his French property will be governed by French law, while his or her English property will be administered by English law.
3. This could become more complicated if an English citizen dies resident in France and decides that French law should apply to the entire estate. Because the English citizen chose France (his or her habitual residence) his movable assets will be administered under French law. There is conflict of laws under this scenario because in England his assets will be governed by his or her domicile (England). This ambiguity was created because England has chose to not adopt the new regulations. It is not clear whether English law or French law should apply to his movable assets.
4. Finally, where a French citizen dies in England and chooses English law, the person's French assets might be administered under English law instead of French law. 

See David Anderson & Nicole Gallop Mildon, The New Inheritance Laws, Complete France, Dec. 14, 2012.

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

Skills & Values: Property Law by Brian D. Shannon and Gerry W. Beyer published

LexisNexis has just released Skills & Values: Property Law authored by Brian D. Shannon (Charles B. 'Tex' Thornton Professor of Law, Texas Tech University School of Law) and Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law).

This innovative experiential learning based book allows students to appreciate the connection among theory, doctrine, and practice in property law. The exercises provide an opportunity for studying concepts from the perspective of a practicing attorney who must not only know the law, but also employ lawyering skills and values - such as legal strategy, factual development, advocacy, counseling, drafting, problem solving, and ethical principles - in zealously representing a client.

Each chapter addresses a specific topic covered in most property law school courses. The chapters begin with an introduction to help bridge the gap between the actual practice of law and the doctrine and theory studied in class. Students will then have the opportunity to engage in active, "hands-on" learning by working through a stand-alone exercise that simulates a real-life legal dilemma. The exercises are as authentic as possible, incorporating materials such as client interview videos, convenience account agreements, sales contracts, deeds, property descriptions and photos, variance applications, zoning regulations, and homeowner association bylaws. The self-assessment tool included in the companion web materials for each chapter suggests ways that a practicing attorney might have approached each exercise. It is not meant to provide "the answer," but to identify issues and strategies students should have considered in order to effectively represent a client.

Rightful Heir of $7 Million In Gold Coins Declared

As I have previously discussed, a reclusive man in Nevada named Walter Samasko, Jr. was found dead in his home along with $7.4 Million in gold coins and bars. Now, officials in Carson City, Nevada have declared Arlene Magdon as the rightful heir to the gold found in Samasko's garage. City Clerk-recorder Alan Grover stated that it took the county at least a month to determine that Magdon was the rightful owner. Grover's research revealed that Magdon was Samasko's first cousin and his only living relative. Magdon was not the only party that was thought to be the relative of the reclusive Nevada man. Many others came forward claiming to be relatives of Samasko. One of these people who came forward claimed that he only recently remembered that he was related to Samasko. The man claimed that he was a secret agent that had suffered a head injury, rendering him unable to remember that he was related to Samasko. 

A court has set a hearing to occur on December 18, 2012 to certify that Magdon as the legitimate heir. After an $800,000 tax on the gold is deducted from the total amount, Magdon is likely to receive the remainder sometime in 2013.

See Arlene Magdon, Distant Relative Of Dead Reclusive Walter Samasko Jr., Heir To $7 Million Found In Garage, The Huffington Post, Dec. 14, 2012.

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

Recent Case Involving a No Contest Clause

Clause held enforceable although purporting to disqualify beneficiary who cooperates or aids in challenge.  A father’s lifetime trust and pour over will disinherited his son and contained a no contest clause purporting to apply to contests whether or not taken in good faith or ultimately successful and to anyone cooperating or aiding in any contest.  The son settled his claims against his father’s estate, but only after the trial court ruled that the no contest clause was unenforceable because it impeded son’s discovery efforts.  On appeal by the personal representative, the Arizona intermediate appellate court reversed, holding that the applicable statute which makes no contest clauses unenforceable if probable cause exists for taking a prohibited action does not conflict with the clause at issue and that the clause’s prohibition on cooperating or aiding does not violate public policy because it should be limited to voluntary cooperation and not apply to testifying in court or answering a subpoena for documents.  In re Estate of Stewart, 286 P.3d 1089 (Ariz. Ct. App. 2012).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

Longest Serving Maine Probate Judge Retires

After serving 50 years on the bench Allan Woodcock, Jr., Penobscot County Judge of Probate, is set to retire on January 1, 2013. The 92-year-old judge said that while he did not want to retire he felt that this was the appropriate time to retire. As a Maine County Judge of Probate, he handled a number of issues, including "estates, wills, guardianships, conservatorships, adoptions, changes of name and related matters." The judge commented that while his job was a limited one, he knew that it was an important job. Judge Woodcock noted that he particularly enjoyed working on adoptions.

Until a replacement judge is appointed, the probate judges from other counties will fill his seat. In Maine, the Governor will appoint judges to replace retiring judges. Governor Paul LePage will select "a replacement for Woodcock from a list of recommendations made by the Penobscot County Republican Committee."

See Judy Harrison, Longest-serving Maine Probate Judge, 92, To Step Down After 50 Years On Bench, Bangor Daily News, Dec. 12, 2012.

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

Another Insurance Scam

A Louisiana man named Timothy R. Schlatre pled guilty to mail fraud and money laundering for "selling multimillion-dollar life insurance policies based on [his] applicants' fraudulently inflated financial statements." It appears that Schlatre worked with his clients because he paid portions of the commissions that he earned off the sales to his clients. The court record showed that several of his clients used their portion of the commission money to pay the premiums on their life insurance policies. As a result of their actions, several other people have pled guilty to conspiracy to commit mail fraud. While the Chief Judge on this case, Brian A. Jackson, has accepted the guilty pleas of all seven defendants, he is waiting to begin the sentencing process until he receives figures that show the specific losses that New York Life and Lincoln Financial suffered as a result of Schlatre's scheme. 

Schlatre is looking at possibly receiving 30 years in federal prison for mail fraud and money laundering. His conspirators could receive, at a maximum, 5 years in federal prison. 

See Bill Lodge, Insurance Agent Pleads To Scam, The Advocate, Dec. 10, 2012.

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