Wills, Trusts & Estates Prof Blog

Family Foundations as A Teaching Tool

Wealthy families usually try to encourage interdependence among their children by creating a family foundation, a nonprofit organization meant to give away money to charitable organizations.  When these plans work out, they can serve as an example to families who are not as wealthy who can pass down other shared assets. 

One issue that some families have encountered when setting up a family foundation is that later generations may not favor the same charities as the prior generation. If that is not addressed, it can cause conflict later.  21/64, a philanthropic consultancy, and the Johnson Center for Philanthropy conducted a study that examined how younger generations felt about philanthropy. It found that those who followed the baby boomers wanted to give to charities in ways that produced measurable change and wanted to be more hands-on with the groups that they give to.  

See Paul Sullivan, Family Foundations Prepare for the next Generation, The New York Times, Feb. 9, 2013. 

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

Oscar Peterson's Widow Sues Hilary Kole For Copyright Infringement

Kelly Peterson, the widow of Canadian Jazz Pianist Oscar Peterson, has filed suit against one of his collaborators, Hilary Kole. Peterson claims that Kole "gave copies of four tracks she recorded with the pianist to an Internet radio program and that the radio program played at least one of the tunes." The tracks that are the subject of the lawsuit were recorded by Peterson and Kole but never released. As a result of the copyright infringement, Peterson filed suit in a Manhattan federal court, claiming $1 Million in damages.

See Associated Press, Oscar Peterson's Widow Sues Singer Hilary Kole For Copyright Infringement, The Star, Feb. 7, 2013.

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

Famous Last Words

Below is a detailed list of famous last words uttered by celebrities. The significance and circumstances surrounding their last words can be found in the link to the article that is provided below.

1. Bob Hope: "Surprise Me"
2. Glenn Miller: "Where the hell are the parachutes?"
3. Eugene O'Neill, Sr.: "I knew it! Born in a hotel room and, goddamn it, dying in a hotel room."
4. Carl "Alfalfa" Switzer: "I want that fifty bucks you owe me and I want it now!"
5. Groucho Marx: "This is no way to live!"
6. Alfred Hitchcock: "One never knows the ending. One has to die to know exactly what happens after death, although Catholics have their hopes."
7. "Moe" Howard (Three Stooges): "I've been really sick lately, so I'm sorry that I haven't answered yours and Ernie's letters, but I think about you daily."
8. Rod Serling: "That's what I anticipate death will be: A totally unconscious void in which you float through eternity with no particular consciousness about anything."
9. Sid Vicious: "We had a death pact. I have to keep my half of the bargain. Please bury me next to my baby. Bury me in my leather jacket, jeans and motorcycle boots. Goodbye."
10. John Wayne: "Of course I know who you are. You're my girl. I love you."
11. Jackie Wilson: "My heart is crying, crying."

See Chris Higgins, The Surprising Last Words of 11 Entertainers, The Week, Feb. 7, 2013.

Found: The Skeleton of Richard III

A skeleton was found under a car park in Leicester, and tests have confirmed that the skeleton is that of King Richard III.  Tests on his skill and body indicate that he was brutally hacked, presumably by victors on the battlefield, and ultimately suffered at least two fatal head wounds.  

DNA recovered from the remains played a large role in the academics' conclusion that this was Richard III's skull.  Radio-carbon dating and battlefield wounds on the skeleton also played a role in the "beyond reasonable doubt" determination. 

The remains, which were under the ground for over 500 years, will be interred in the city's cathedral.  

See Skeleton Found in Car Park is Richard III, IrishTimes.com, Feb. 4, 2013. 

Judge Rules Majali Family Cannot Review Arbitration Award

I previously blogged abut Sandi Majali's estate challenging an arbitration award to Majali's former business partner, Lindani Mthwa.  On Thursday, South Gauteng High Court judge threw out the estate's attempt to review the award.  The judge said that Majali's estate had no direct interest in it.  

The Majali family's counsel tried to argue that, because Majali was not notified in writing of the initial arbitration hearing that occurred while he was still alive, the award was obtained improperly.  And if an award was improperly obtained, the Arbitration Act entitles a court to set aside an arbitration order by "any party to the reference."  The judge did not think that the failure to notify Majali of the hearing in writing was fatal.  He also said that Majali did not even qualify as a "party to the reference".  Imvume claimed to be Siyanda's shareholder, not Mr. Majali.  A party to the reference must have a legal interest in the arbitration, and Majali did not.  

See Franny Rabkin, Majali Estate Loses Bid to Access Dividends, BDlive, Feb. 8, 2013. 

TJ Jackson Has Petitioned Michael Jackson's Estate For Reasonable Compensation

As I have previously discussed, TJ Jackson was named to be co-guardian to Michael Jackson's three children. Now, it appears that TJ and the executors of Michael Jackson's estate are asking a federal judge to provide TJ "a reasonable amount of money to keep the ship afloat" so to speak. TJ claims that without some help he cannot continue to be the surrogate parent of Jackson's children. In the petition, the executors claim that TJ has shown great devotion to the children and spends upwards of 40 hours a week caring for them. The petition also claims that this has been difficult for TJ considering that he has three children of his own. The petition concluded that even though TJ was appointed to be the children's co-guardian this past July, he has received no compensation for his services. The executors ask that TJ be granted $9,000 a month, retroactively applied from July to the present. 

See TJ Jackson -- He Needs Cash To Care For Michael's Kids, TMZ, Feb. 6, 2013.

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

REITbid, an Online Auction Platform

REITbid is now offering "a new online auction platform that matches buyers and sellers of shares in existing non-traded public real estate investment trusts (REITs)." The program is designed to create a easy way to make illiquid assets liquid. According to REITbid, these are the advatanges to their program:

In addition to offering a liquidity option and streamlining the entire process of buying, selling and transferring shares, REITbid provides several other unique advantages including:

• User-friendly platform that is easy enough for virtually any qualified investor to use
• Transparency – provides instant access to non-traded REIT metrics and links to SEC filings and sponsor data; users can also view all pending bid activity on each auction
• Convenience – ability to bid on and find documentation about available non-traded REITs 24 hours per day
• Security – strict multi-layer protection of all documents and personal data

Inheritance For the Royal Baby

While we do not even know whether Duke and Duchess of Cambridge's baby will be a boy or a girl, their child is already set to inherit a vast fortune and "become the custodian of extraordinarily valuable state assets." Her large inheritance is the result Queen Elizabeth II's great personal wealth. Her majority owns a large number of properties in northwest England known as the Duchy of Lancaster. The Duchy of Lancaster is 46,000 acres collection of property valued at 348 million pounds. The property yields a decent profit at about 13 million pounds per year. King Edward III established the Duchy for his son, Prince John of Gaunt. The duchy was created after Prince John married the Duke of Lancaster's daughter. The couple's son would eventually rise to throne as King Henry IV. It was Henry who decided that the Duchy should remain separate from other crown properties. He also decided that the property would pass directly from the monarch to his or her heirs.

The only thing that could possibly make this better is that the Duchy is tax-free because of 1993 agreement with Queen Elizabeth II and Prime Minister John Major that exempts the assets from the applicable inheritance tax. This would likely also apply to other assets that Queen Elizabeth has received from her father. These properties are a little different than the Duchy because the Duchy's principal must be kept in the principal.  The future heir will also get access to all of the royal palaces. The only trade off here is that the future monarch who inherits will have to manage the crown properties.

See Carolyn Harris, How An Inheritance Awaits Kate and William's Baby?, Bloomberg, Jan. 30, 2013.

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

Wealth Can Poison a Child's Desire, Says Some of the Wealthiest Parents in America

Graham Tuckwell is not well-know, mostly because of his own efforts to remain anonymous. The Australian entrepreneur is credited for constructing the ETF Securities, a multi-billion dollar financial empire. While he has avoided the publicity and fame that comes with amassing a great amount of wealth, he recently made news when he announced that he would be giving "$50 million to [the] Australian National University for scholarships." While the news that he is making a gift seems bland, his reasoning is not. Tuckwell made the claim that money and wealth can ruin a person's children. Tuckwell went on to say that children develop better if they are allowed to obtain a sense of achievement. He concluded that giving them wealth does so much to destroy their personal desire to accomplish anything. Tuckwell is not alone. The most famous supporter of this school of thought is Warren Buffett. Of course, there are children that inherited great amounts of wealth and are still successful people. For example, Donald Trump's children were raised with large amounts of wealth and they are still successful and business savvy. 

See Robert Frank, Wealth 'Poisons' Kids, Says Aussie Finance Tycoon, CNBC, Feb. 6, 2013.

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

Small Rise in Charitable Giving

When it comes to fundraising, small non-profits are faring better than larger charities. Blackbaud, a company who provides software for nonprofits,  conducted a study of 3,144 nonprofit groups.  Their report shows that charities that raise less than $1 million a year have seen a 7.3% increase in charitable giving.  In contrast, mid-size groups have seen a 2.7% increase, and larger groups only saw a 0.3% increase.

Overall, Blackbaud found that charitable giving was up 1.7% last year as compared to the 4.2% it rose in 2011. Results varied by sector.  Religious groups saw the biggest boost in 2012, followed by education groups. Online philanthropy also continues to grow in importance. 

See Charitable Giving Up Just 1.7%, Barron's, Feb. 4, 2013.

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

7 Nations with Low Income Tax Rates

The top rate of U.S. income tax is relatively high compared to international standards.  The previous 35% top rate of income tax increased to 39.6% for individuals with at least $400,000 of taxable income. Most countries fall below that, but Western Europe has the highest personal tax rates in the world with an average top rate of 46%.

In 2011, almost 4% of the American population moved to a different country and 1,800 people renounced their citizenship because the United States still taxes its citizens on income they've earned while living abroad. The Wall Street Journal lists the top 7 nations for dodging income tax: 

1. Czech Republic: 15%

2. Costa Rica: 15%

3. Hong Kong: 15%

4. Singapore: 20%

5. Jamaica: 25%

6. St. Kitts and Nevis: 0%

7. Cayman Islands: 0%

See 7 Top Nations for Dodging Taxes a la Depardieu, The Wall Street Journal, Jan. 9, 2013. 

Increasing Number of Disputes Over Inheritances

Recent figures indicate that the number of disputed inheritances is rising.  The number of court battels over wills has doubled over the past four years.  Lawyers attribute the rise in disputes to the recession. More people are relying on inheritance to help with their financial problems.  

At the same time, the value of the average estate has increased over the past decade. In 2002, the average estate was worth £152,358, but is now worth £265,281. This means that the average cost of processing an estate is rising too. 

Solicitors add that the figures for the rising court cases don't even reflect the full picture since the majority of disputes are settled out of court.  

See Teresa Hunter, Battle of Wills: The Legal Bills that Swallow Entire Estates, The Telegraph, Feb. 4, 2013. 

Couple In Arkansas Catches Big Fish On Fishing Trip

A couple in Arkansas had a great haul on a fishing trip that they recently took together. The couple, Stephen and Terri Weaver, "were on a fishing trip when they stopped to buy [a lottery] ticket at T-Ricks convenience store in Pangburn...[t]hey stopped at the same store on their way home and bought another ticket." It is unclear whether the couple actually caught any fish that day, but they did manage to win the lottery twice in one day from the same store. One the tickets that the couple purchased was worth a $1 Million prize and the other ticket was worth a $50,000 prize. The Weavers claimed their prize and they plan to use the money to invest in their retirement and pay their bills.

See Associated Press, Arkansas Couple Twice Win Lottery On Fishing Trip, Yahoo! News, Feb. 4, 2013.

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

Split of Authority Makes it Hard to Predict Duty to Account

State appellate courts are dealing with a developing split of authority about what fiduciary duties a trustee owes to beneficiaries of a revocable trust. In 2011, the issue arose for the first time in Missouri. A Missouri appellate court ruled that the trustee did not owe a fiduciary duty to the beneficiaries before the settlor's death. The court reasoned that because there is no fiduciary duty, the beneficiaries are not guaranteed an accounting prior to the settlor's death. Other states that have reached a similar legal conclusion are Louisiana, Arizona, and Michigan. Conversely, in 2012 the California Supreme Court ruled in favor of preventing harm to the beneficiaries’ interests. Boiled down the holding states, a beneficiary may review the acts of the trustee while the settlor was alive, but only after the settlor dies. The California Supreme Court's ruling is similar to Florida's legal conclusion.

Recently, the Iowa Supreme Court held that the state's statutory code addressed the duty to account. Under the state statute, the settlor is the only person permitted to request an accounting for the revocable period of the trust. This statute is similar to Missouri's appellate court outcome. Surprisingly, the Iowa case was also a case of first impression. In states that have not ruled on the issue, it will be difficult for trustee's to predict which legal outcome the court will side with. 

See Luke Lantta, Iowa Weighs In On Fiduciary Duty To Account To Beneficiaries Of Revocable Trusts, BryanCaveFiduciaryLitigation.com, Feb. 4, 2013.

Mystery Taxpayer Pays $50 Million in Estate Taxes

A single wealthy taxpayer recently paid $50 million in estate taxes to the District of Columbia. The tax payment was so large that it accounted for a sizable portion of the $417 million budget surplus for the 2012 fiscal year. The city has not released the name of the decedent but there have been some guesses as to his or her identity. Some people guess that the taxpayer might be Sidney Harman, who was the founder of Harman International Industries. Mr. Harman passed away in 2011 with an estimated net worth of $500 million. After taking into consideration the unified credit and the applicable estate tax rate, Harman would have probably owed about $50 million in estate taxes.

See Michael Neibauer, Mystery Taxpayer Responsible For D.C.'s $50M Estate Tax Windfall, Washington Business Journal, Jan. 30, 2013.

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

Guest of Honor At Funeral Wakes Up

A centenarian woman appeared to have passed away on January 19 of this year, but came back to life a little more than half a day later. The woman, Peng Xiuhua, was from Shenshuidong Village in China. Recently, she had an accident and fell down. This prompted her daughters to come and look for their mother. About 10 days after she fell down, her daughters believed that they had found her dead in her home. According to her daughters, she was not breathing and she had no pulse.

The community where she lived prepared for her funeral but Peng had other intentions. After they placed her within her coffin, Peng "suddenly opened her eyes and smilingly said, 'Hello, there.'" Those who had come to mourn her were unsurprisingly shocked to discover that she was still alive. The villagers had celebration that night to celebrate this woman remarkable longevity instead of remembering the life she led. There are other stories of this happening, like the 28-year-old Egyptian man who woke at his own funeral after his family thought he suffered a heart attack or the woman who "rose" from the dead to cook her family lunch.

See e.g., Fan Junmei, 'Dead' Centenarian Revived At Funeral, China.org.cn, Jan. 23, 2013; 28-year-old Egyptian Man Wakes Up At His Own Funeral, MSN, May 5, 2012; Grandma Returns From The Dead, Fixed Lunch, Scares Family, MSN, Mar. 1, 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.

New Case Rules on Beneficiary Rights of an Attorney Related to Decedent By Marriage

In Estate of Lira, a California court of appeals ruled that a law allowing an attorney who was related by marriage at the time of drafting the will, but not related by marriage at the time of the decedent's death, allowed an attorney in such a situation to be a beneficiary. 

Oligario Lira and Mary Terrones were married in 1968.  In 2008, Mary filed a petition for dissolution of the marriage, and in 2009, before the dissolution was final, Lira executed his will and trust, naming stepson Robert, an attorney who helped draft the will, as his successor as trustee and personal representative of his estate.  

On February 3, 2010, the dissolution of the marriage became final and Lira died thereafter on July 20, 2010.   Mary Ratcliff filed a petition for the probate of Lira's estate while Robert Terrones filed a petition asking the court to appoint him as executor of Lira's estate.  Ratcliff alleged that the will was invalid because of the law that prohibits lawyers who draft a will from benefitting from that will.  

The court did not agree with Ratcliff.  Instead the court reasoned that even though Robert Terrones was related by marriage to Lira at the time Lira executed his will, he was not related to him by marriage at the time of his death, so he is still able to be the executor of the estate and receive property from the trust. 

See Drafter of A Will Who Is Related By Marriage to the Transferor at the TIme of the Drafting, But Not at the Time of the Death, May be a Beneficiary, Kronick, Moskovitz, Tiedemann & Girard, Feb. 1, 2013. 

State Estate Tax Still Alive and Well

Even though the fiscal-cliff compromise kept the federal estate tax exemption at bay, many state governments are imposing estate or inheritance taxes on amounts lesser than the federal $5.5 million.  Estate tax revenue is more important than ever to keep many government programs running.  Please click here to see what some of the states are doing with their state estate tax. 

See Dan Caplinger, Estate Tax is Alive and Well, and States Are Dying for the Revenue, The Tax Center, Feb. 4, 2013. 

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

Four Tips for Executors

Whether one is appointed in a will as an executor or appointed by the court as an administrator, whoever has to close down an estate has a hefty responsibility.  SmartMoney provides a checklist that features four major steps an executor needs to consider: 

1. Filing the final 1040: First, an executor needs to file the decedent's taxes for the year of his or her death, covering the period from January 1 through the date of the death.  The return date is still April 15. Executors should be sure to take medical expenses into account because they can potentially be deducted on that final tax return.

2. Filing the Estate's Income-Tax Return: In addition to filing the decedent's individual final income taxes, the executor needs to file the estate's income tax as well. The estate's first year income begins right after the decedent's death.  The year-end can be December 31 or the end of any other month that results in an initial tax period of 12 months or less.  An executor must file this by the 15th day of the fourth month after the year-end. 

3. Filing the Estate's Estate-Tax Return: This is filed on a Form 706.  If the decedent did not make any sizable gifts before dying, unless the estate is worth over $5.5 million for 2013 decedents, no estate tax is due and no Form 706 is required. If a Form 706 is required, it is due nine months after death with the possibility of a six month extension. 

4. The Miscellaneous Details: These details include getting a federal employer identification number for the estate, filing a form 56, which notifies the IRS that the executor will be acting on behalf of the estate regarding tax matters, opening a checking account in the name of the estate with some funds transferred from the decedent's accounts. There could be more executor responsibilities beyond these details as well. 

See Bill Bischoff, Closing Down the Estate, SmartMoney.com, Feb. 5, 2013.

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

Firm Debevoise & Plimpton Terminates Trust and Estate Practice

One of the largest, prestigious, and traditional firms, Debevoise & Plimpton, has decided to terminate its trust and estate planning practice. The move surprised many in the legal field because of the firm has retained its strong partnership culture, especially because many firms have moved away from that school of thought to more of a bottom line approach. Debevoise & Plimpton is the latest firm to make this move.Some in the industry believe that it is a result of a change in the profession. More specifically, it appear that the legal profession is becoming more of a business.

At one time, estate planning was considered to be a necessary and lucrative practice by corporate law firms, who would spend their efforts advising and planning for wealthy families. Now, estate planning has taken a secondary position behind the cash cow of corporate law firms today: "multibillion-dollar corporate transactions and high-stakes litigation." Furthermore, estate planning is not as profitable because they are not as work heavy as complex lawsuits or megamergers. Even with the trend, there are those that are resisting change. For example, "In 2011, seven trusts and estates lawyers from Weil, led by Carlyn S. McCaffrey, moved to McDermott Will & Emery, a firm with about 65 trusts and estate lawyers, one of the larger such practices." In addition, some claim that the argument that estate planning is not profitable just is not correct. The head of Katten's trust and estate practice argued that if well-integrated estate planning can produce lots of work for the firm.

See Peter Lattman, Debevoise & Plimpton Drops Trusts and Estates Practice, DealB%k, Feb. 5, 2013.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) and Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.