Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, December 27, 2012

Top 10 Stories From "The Trust Advisor" In 2012

Scott MartinScott Martin (Senior Editor, The Trust Advisor) recently published an article entitled, The 10 Biggest Trust Advisor Stories of 2012, Dec. 23, 2012. Please visit their website to get the complete list of their most popular articles this year, with links and a small summary of the articles. Provided below is the introduction to his article from The Trust Advisor.

Over the last 12 months, the Trust Advisor has evolved from a niche-oriented weekly email letter into a full-fledged wealth management industry news source.

Thank you for your attention and for all the feedback over the last year. We have a lot planned for you in 2013. I think you’re going to like it. If not, let us know!

Once again, you showed us that you’re hungry for advanced multi-generational financial planning stories, especially if they have a celebrity twist. And given the election year and looming financial cliff, any coverage from Washington was extremely popular.

However, picking the iconic stories of 2012 was tougher than usual simply because we grew so much over the course of the year.

We published four times as much content as we did last year and our subscriber list grew enormously.

Because of that, simply adding up the raw readership numbers would weigh the list unfairly toward stories we’ve published over the last few months – there are just that many more of you now than there were back in February.

So what I’ve done here is figure out what proportion of our subscribers at the time were reading a particular story when it came out.

That way, if you’re new around here, you can get a better sense of the breadth of what we cover. And if you’ve been reading all along, you can review a few old favorites.

December 27, 2012 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 26, 2012

Article on The Cuban Embargo on Inheritances

Enrique-Zamora-EsqEnrique Zamora (Attorney at Zamora & Hillman, Adjunct Professor at St. Thomas University School of Law) recently published his article entitled Impact of The Cuban Embargo on Inheritances by Cuban Nationals, 24 St. Thomas L. Rev. 525 (2012). A portion of the article is available below: 

Background of OFAC and its Purpose
“The Office of Foreign Assets Control (“OFAC”) administers and enforces economic sanctions, primarily against countries and groups of individuals, such as terrorists and narcotics traffickers.” The sanctions block assets and restrict trade to accomplish foreign policy and national security goals.
Historical Framework
The Treasury Department has a long history of dealing with sanctions. For example, prior to the War of 1812, Secretary of the Treasury, Albert Gallatin, imposed sanctions against Great Britain for harassing American sailors. During the Civil War, the Union Congress enacted a law prohibiting transactions titled the Morrill Tariff of 1861 which provided a licensing regime under rules and regulations administered by the Treasury Department and called for the forfeiture of goods involved in transactions with the Confederacy.
OFAC is the successor to the Office of Foreign Funds Control (“FFC” ‘). The FFC was established during World War II following the German invasion of Norway in 1940. The Secretary of the Treasury administered the FFC program throughout World War II. The initial purpose of the FFC was to prevent the Nazi use of the occupied countries' holdings of foreign exchange and securities. It also attempted to prevent the forced return of funds belonging to nationals of those countries. Such controls were further extended to protect the assets of other invaded countries. After the United States formally entered World War II, the FFC played a leading role in economic warfare against the Axis powers by prohibiting foreign trade and financial transactions, and also by blocking enemy assets.
OFAC itself was formally established in December of 1950. It was created after China entered into the Korean War, when President Harry Truman declared a national emergency under the Trading with the Enemy Act of 1917 (“TWEA”). The President had then effectively blocked all Chinese and North Korean assets that were subject to the jurisdiction of the United States.
In 1963, pursuant to TWEA, President John F. Kennedy wrote a memorandum to the Secretary of State. Ultimately, a trade embargo was imposed which ordered the blocking of Cuba's assets and of assets belonging to Cuban nationals. The relevant regulations that implemented these sanctions are found in 31 CFR part 515 [et seq.].
Section 16 of the TWEA provided for corporate criminal penalties of up to $1,000,000 and individual criminal penalties up to $100,000 or ten years in prison, or both, per count. Fines for criminal violations could be increased pursuant to 18 U.S.C. § 3571. TWEA also provided for the forfeiture of property that is the subject of a violation. TWEA authorized civil penalties up to $50,000 per violation. It also allowed the respondent to request an agency hearing. The respondent also had the right to prehearing discovery, and if the respondent elected this option, the civil penalty could be imposed only after such a hearing.
In 1977, Congress passed the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. §§ 1701-06. IEEPA replaced TWEA as the statutory authority for a Presidential declaration of a national emergency in peacetime for the purpose of imposing economic sanctions. Other pre-existing programs continue to be administered under TWEA, but new programs under TWEA may be established only during wartime. Most recently, sanctions remained in place under TWEA only with respect to (1) comprehensive sanctions against Cuba, (2) a residual blocking of North Korean assets previously blocked, and an ongoing prohibition against the importation of certain goods from North Korea without an OFAC license, and (3) certain offshore trade in strategic goods with the former Soviet Bloc.

December 26, 2012 in Articles, Estate Planning - Generally | Permalink | Comments (1) | TrackBack (0)

Heirs of the Derzon Coin Shop Seeks Retribution

Estate DisputeAs I have previously discussed, the owners of the Derzon Coin Co. and sons of late-owner Rebecca Derzon, Alan and Mark Derzon, re-open the store after a long estate battle over their mother's estate ended when a judge voided a will that would have given the store to Rebecca's half sister and a long-time employee. Now, Alan and Mark are demanding that Lori Laatasch (half sister), Diane Mehalko (long-time employee), and the law firm that represented the two women pay them for the time that they improperly had control over their company. More specifically, "[t]he motion demands that Laatsch, of Hartland, return $1.4 million and that Diane Mehalko...repay $646,979." The money that the two brothers are asking for includes the salaries of the two women and any other money that was paid to them in the form of dividends or to cover the costs of the luxury cars that the two women used for business. The motion that was filed also seeks money from other parties that received money from the estate, and seeks to recuperate money that was used by Laatasch and Mehalko to retain control over the estate. 

The brothers argued within the motion that even if Laatasch and Mehalko cannot pay them, the law firm that represented the two women should reimburse the estate for the work that they did on the case. The brothers argued that because the judge found that Laatasch acted in bad faith, the firm should also be found to have acted in bad faith. The brothers are asking that the money used to pay the firm from the estate, a sum of $60,000, be returned to them. In total, the brothers are asking for about $2.5 million.

See Cary Spivack, Coin Shop Heirs Seek Repayment, Milwaukee Journal Sentinel, Dec. 20, 2012.

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

December 26, 2012 in Current Events, Estate Administration, Estate Planning - Generally | Permalink | Comments (1) | TrackBack (0)

Happy First Day of Kwanzaa

Happy_Kwanzaa Good Morning,

Happy first day of Kwanzaa!


December 26, 2012 in About This Blog | Permalink | Comments (1) | TrackBack (0)

Tuesday, December 25, 2012

The “Tax” Grinch That Stole Christmas

IRS 2The IRS had decided to take a six-day absence from issuing Employee Identification Numbers (EINs) upon the eve of the end of $5.12 Million lifetime federal estate and gift tax exemption. This will likely place a number of estate planners and their clients who are looking to set up trusts to make last minute lifetime gifts in a difficult situation. Trusts, which are considered to be tax entities, need an EID. The IRS released this notification on its webpage, the place where estate planners would go to obtain an EID for a their client’s particular trust. The IRS stated that this six-day period will begin at 6:00 a.m. on December 27th and last through 6:00 a.m. on January 2nd.

This is the not the first time that attorneys have had difficulties with the IRS’s webpage. Many times, the webpage will not produce an EID when an attorney applies for one. There is one exception that some attorneys can use but only if they are establishing a grantor trust. A grantor trust is a board spectrum term that usually applies to when the grantor, or the settlor as he or she is otherwise known, “retains certain rights or powers.” In this instance, “a grantor trust is not treated as a separate entity for income tax purposes and the grantor…must pay tax on trust earnings.” In that case, an attorney can use the grantor’s social security number.  

See Deborah L. Jacobs, IRS Is Grinch Who Stole Tax ID Numbers, Forbes, Dec. 23, 2012.

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

December 25, 2012 in Current Events, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Merry Christmas

Merry_Christmas Greetings,

To all my Christian readers, please accept my best wishes for a very Merry Christmas.


December 25, 2012 in About This Blog | Permalink | Comments (0) | TrackBack (0)

Monday, December 24, 2012

'Spiritual' Estate Planning

ImagesAlice Reiter Feld advises clients on "spiritual" estate planning, which focuses on how to pass down money based on values.  Many baby boomers are turning to "spiritual" estate planning because they want to make sure their values are passed along with their money.  The main goal is to leave money behind with a purpose. 

Those who are drawing up an estate plan should first determine who is among their kin. It becomes more challenging to make this decision as family relationships become more complicated.  Parents should also consider if they have passed their values on to their kids.  And if parents do not plan to leave the money to children equally, they should sit down with the children and discuss why they decided to distribute their money as they did. 

See Donna Gehrke-White, 'Spiritual' Estate Planning on Rise, Sun Sentinel, Dec. 23, 2012. 

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

December 24, 2012 in Estate Planning - Generally | Permalink | Comments (2) | TrackBack (0)

STEP Institute on Tax, Estate Planning and the Economy

Images-4On January 24th and 25th, the Orange County Chapter of the Society of Trust and Estate Practitioners (STEP) presents the STEP Institute on Tax, Estate Planning and the Economy. This event will feature outstanding speakers and share effective strategies for increasing billable hours. The Institute will  be held at the Newport Beach Marriott at Fashion Island and discounted room rates are available.  Please click here to reserve a room for the conference. 

December 24, 2012 in Conferences & CLE, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Article about Testation and Speech

David-HortonDavid Horton (Acting Professor of Law, University of California, Davis) recently published his article entitled Testation and Speech, 101 Geo. L.J. 61 (November 2012).  The introduction to the article is available below: 


Max Feinberg, a Chicago dentist, had been dead for twenty-two years when he made front-page news.  The son of immigrants who fled anti-Semitism in Russia, Max had always been proud of his religious heritage.  His family described him as a “traditionalist”: a conservative investor who wore a coat and tie to the office even on weekends.  But as he aged, he became preoccupied with the high rate of intermarriage among young Jews and with his own family's gravitation toward other cultures and traditions.  Shortly before he died, he learned that his grandson had taken a gentile to the junior prom.  He retaliated by inserting a restriction into his trust: “A descendant of mine ... who marries outside the Jewish faith ... shall be deemed to be deceased for all purposes of this instrument ....”
Decades later, Max's grandchildren challenged the validity of this provision, which they called the “Jewish clause.”  In a decision that received national  media attention, an Illinois appellate court held that the ““Jewish clause” violated public policy by discouraging Max's grandchildren from marrying whomever they wished.  However, the court's deep ambivalence shone through. Each member of the three-judge panel wrote a separate opinion. Although the dissent claimed that Max merely sought to “preserve [a] 4,000-year-old heritage,” the concurrence accused him of fostering “the worst bigotry imaginable.”  Nevertheless, the Illinois Supreme Court unanimously reversed, reasoning that the state must honor a testator's choices even if they “might be offensive ... to outside observers ....” 
The sharp divide over Max Feinberg's estate plan reflects an evolving tension in U.S. wills-and-trusts law. Traditionally, the field's first principle has been testamentary freedom: the idea that owners enjoy “the nearly unrestricted right to dispose of their property as they please.” This deferential approach has long been one of the most blazingly idiosyncratic traits of all American jurisprudence. Other western legal systems carve out a mandatory share of decedents' assets for their dependents or allow judges to rewrite ““inequitable” estate plans under family-maintenance regimes.  Conversely, in forty-nine states and the District of Columbia, testators and settlors may disinherit their children and grandchildren, even if doing so would be “unreasonable, unjust, injudicious, or cruel.”  American testators and settlors also enjoy broad dead-hand control: the privilege to regulate their belongings long after they pass away.  In fact, over the course of the last two decades, dead-hand power has expanded dramatically, as twenty-one jurisdictions have abolished the Rule Against Perpetuities (a doctrine that capped trust duration at roughly ninety years). Settlors in these states can now write their estate plans on a canvas the size of eternity.
Yet this monumental change has provoked a backlash. With Americans projected to bequeath $41 trillion in the next half-century--the largest intergenerational wealth transfer in history--some scholars and policymakers have begun to focus less on honoring testamentary intent and more on preserving the value of the corpus. This movement is particularly striking in trust law, where a rash of recent doctrinal adjustments has stripped settlors of power. For example, the Uniform Trust Code (UTC), the Restatement (Third) of Trusts (Restatement Third), and a rising number of states now require “[a] trust and its terms [to be] for the benefit of its beneficiaries.”  Although the scope of this newly minted rule is unclear, it arguably imperils many testamentary commands, including personal conditions such as Max Feinberg's “Jewish clause.”  In addition, although trust law has traditionally consisted of default rules, the UTC contains an array of “intent-defeating” mandatory doctrines that have the potential to thwart strong testamentary preferences. Thus, the contours of testamentary freedom have become longer but thinner: the dead may be able to control their property forever, but they have less actual control over their property.
In this Article, I offer a different take on these issues, grounded in a novel view of what it means to create a will or trust. Courts and scholars think of testation in one of three ways: as the exercise of a property right, as a contract between the owner and the executor or trustee, or as the creation of a corporation that administers the corpus. I argue that these perspectives omit something important. Testators and settlors do not merely arrange for their possessions to be managed and distributed after they die. They also do something else: they make a statement. Testation is a form of speech.
For decades, scholars have described testation as the polar opposite: a legalistic ritual that stifles an owner's voice. After all, estate plans are written by attorneys, not testators or settlors. As a result, “even ideas initiated by the testator are transformed in the process of being ‘translated’ into legal terms.”  Similarly, testamentary instruments often seek to achieve impersonal goals like tax minimization, and are laced with alienating jargon, such as “per stirpes,” “marital deduction,” and “bypass trust.” Thus, commentators denounce them as “formal, standardized, and dull legal document [s]” that “manifest[] almost no individuality.”
 I see things differently. For one, testamentary self-expression can be apparent from the face of the will or trust. Consider Max Feinberg's “Jewish clause.” Was it an attempt to use his property to foist his views on his grandchildren? Of course. But it was also a ringing declaration of his core beliefs. If he had picketed city hall with a sign that announced his support of Jewish marriage, he would have engaged in political speech and thus invoked “the highest rung of the hierarchy of First Amendment values.”  To be sure, unlike the soapbox lecturer or street pamphleteer, Max spoke in a private venue, to a limited audience, with words that were refracted through his attorney's draftsmanship. Then again, just like the archetypal First Amendment speaker, Max inserted the “Jewish clause” because he cared deeply about an issue and wanted to influence others. In fact, because testation takes place against the backdrop of death and is the last word in a web of complex relationships, it is virtually impossible to convey a message with the same emphasis or emotional punch. Indeed, even an owner's distributional choices can be highly (albeit implicitly) expressive. Testators and settlors must divide everything they own among many potential beneficiaries in one sweeping gesture. By rewarding some people, snubbing others, and attaching conditions to their bequests, they offer a final assessment of their lives, their loved ones, and the world.
This descriptive account opens the door to several positive and normative claims. For one, contrary to the broad consensus that the Constitution only prohibits the government from abolishing testation completely, I argue that some wills-and-trusts rules fail First Amendment scrutiny. Specifically, the communicative impact of making a will or trust is most potent when a testator or settlor defies prevailing norms by leaving her estate to nonfamily members. However, the doctrine of undue influence imposes additional hurdles on precisely those bequests. Just as states must adjust their tort law to make room for free speech values, I contend that they can no longer isolate “unnatural” gifts for suspect status.
In addition, recognizing testation's expressive function militates against current efforts to narrow the scope of testamentary autonomy. The virtues of self-expression are well known: to speak is to exert power over the world. Yet “reforms” like a broad benefit-the-beneficiaries rule threaten testamentary self-expression. Thus, I argue that courts should construe this new doctrine narrowly. In addition, I challenge the UTC's practice of labeling anti-dead-hand measures as “mandatory.” I assert that, in close cases, judges should continue to do what they have traditionally done: enforce a distinctive component of an estate plan when it reflects a testator's or settlor's deep-seated beliefs.
Throughout the Article, I acknowledge a formidable counterargument: limits on testamentary freedom do not prevent owners from expressing themselves in their dispositive instruments. Indeed, a testator or settlor has spoken even if a court overrides her wishes. I respond by showing that the ultimate distribution of a decedent's property and testamentary self-expression are more tightly entwined than they first seem. Most importantly, when a court invalidates a bequest to a nonrelative under the undue influence doctrine, it does something unique in the context of the First Amendment: it concludes that a highly personal communication was, in fact, coerced. Because a decedent cannot set the record straight, there is no difference between determining that she did not mean to say something and barring her from speaking at all. Moreover, even doctrines like the benefit-the-beneficiaries rule--which do not deny the authenticity of speech but merely seek to avoid economic waste--diminish testamentary self-expression by pushing settlors toward other, less communicative ways of achieving their goals.
The Article contains three parts. Part I describes the orthodox views of testation: that it is the exercise of a property right, a contract-like conveyance, or the creation of a corporate-style entity. Part II argues that testation is also a singular form of speech. It explains that the ritual contains both explicit and implicit communicative elements, as well as strands of “pure” speech and expressive conduct. Part III claims that wills-and-trusts law must make room for testation's expressive function. It first contends that the idea that bequests to nonrelatives are inherently suspicious--which animates the common law test for undue influence and a novel California statute--cannot be squared with the First Amendment. Then, focusing largely on trust law, it asserts that even when the First Amendment does not apply, the fact that a bequest is expressive should affect a court's decision about whether to enforce it.


December 24, 2012 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0) | TrackBack (0)

Top SSRN Downloads

Ssrn_2Here are the top downloads from October 24, 2012 to December 24, 2012 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank Downloads Paper Title
1 319
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
2 125
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
3 95 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
4 62 Resident Rights and Responsibilities in Virginia's Continuing Care Retirement Communities: Building Trust and Stronger Communities
Katherine C. Pearson,
Pennsylvania State University - Dickinson School of Law,
Date posted to database: December 2, 2012
Last Revised: December 2, 2012
5 48 Louisiana Prenuptial Agreements: Issues for Contemporary Spouses
Elizabeth Ruth Carter,
Louisiana State University, Baton Rouge - Paul M. Hebert Law Center,
Date posted to database: November 2, 2012
Last Revised: December 11, 2012
6 44 The Therapeutic Function of Testamentary Formality
Mark Glover,
Louisiana State University - Paul M. Hebert Law Center,
Date posted to database: November 3, 2012
Last Revised: November 3, 2012
7 36 Would Enactment of the Uniform Premarital and Marital Agreement Act in All Fifty States Change U.S. Law Regarding Premarital Agreements?
J. Thomas Oldham,
University of Houston - Law Center,
Date posted to database: December 9, 2012
Last Revised: December 9, 2012
8 35 Sex Post Facto: Advising Clients Regarding Posthumous Conception
Benjamin C. Carpenter,
University of St. Thomas School of Law (Minnesota),
Date posted to database: December 4, 2012
Last Revised: December 8, 2012
9 35 Fiduciary Duties and Exculpatory Clauses: Clash of the Titans or Cozy Bedfellows?
Louise L. Hill,
Widener University School of Law,
Date posted to database: November 29, 2012
Last Revised: November 29, 2012
10 31 LGBT Issues and Adult Guardianship: A Comparative Perspective
Nancy J. Knauer,
Temple University - James E. Beasley School of Law,
Date posted to database: November 9, 2012
Last Revised: November 9, 2012

December 24, 2012 in Articles | Permalink | Comments (0) | TrackBack (0)