Wills, Trusts & Estates Prof Blog

Article on Canceling Deeds Obtained Through Fraud and Undue Influence

Blair J. Berkley (Professor of management, California State University) recently published her article entitled Canceling Deeds Obtained Through Fraud and Undue Influence, 39 W. St. U. L. Rev. 129 (2012). The introduction to the article is below: 

 
This article addresses the common family situation when an elder has a long-standing will or trust leaving his or her real estate in equal shares to his or her children. When the elder becomes infirm, one of the children (or other relative or friend) moves in with the elder to provide care and companionship. The elder then executes a deed conveying all or most of his or her real estate to the caregiver and the other children sue to cancel the deed. 

For example, in Seanez v. Seanez, Manuela Seanez ("Manuela") had four children: plaintiff Jose Seanez ("Plaintiff"), defendant Maria Del Carmen Seanez ("Carmen"), and third parties Victor Seanez and Cristina Seanez. In 2000, Manuela executed an inter-vivos trust ("Trust") and a pour-over will. The Trust names Plaintiff as successor trustee and directs Plaintiff to distribute Trust assets in equal shares to Carmen, Cristina, Victor, and Plaintiff. On January 24, 2001, Manuela purchased a new house in Ontario, California ("House") and took title to the House as trustee of Trust. Carmen seldom saw Manuela at the House and remained somewhat estranged from Manuela following a dispute in the 1970's.

In 2006, Manuela's health began to decline. She complained of extreme weakness and a sudden loss of memory. In February 2007, she was diagnosed as having myasthenia gravis. In July 2007, Manuela began to complain of excruciating sinus and facial pain. By January 2008, Manuela was no longer able to care for herself and required constant attention and assistance. On June 9, 2008, Manuela was diagnosed as having squamous cell cancer of the nasopharynx. In June and July 2008, she suffered several seizures which her physicians attributed to neurological damage and cancer involvement in the brain. Her neurologist found her to have compromised memory and limited orientation.

Carmen saw Manuela's terminal illness and mental and physical weakness as an opportunity to take the House for herself. Hence, on June 14, 2008, Carmen moved into the House to provide care and companionship, assumed control of Manuela's financial affairs, and established a confidential relationship with Manuela. Manuela added Carmen to her checking account and Carmen paid all of Manuela's bills with funds in the checking account. As the only child of Manuela living in the House, Carmen had an exclusive opportunity to influence and importune Manuela. Carmen represented to Manuela that she needed In-Home Supportive Services (in-home nursing) and that she could not qualify for such public assistance if she owned a home.

Carmen hired a notary public and procured a deed. On the evening of July 9, 2008, while Plaintiff, Cristina, and Victor were not present at the House, Carmen secretly, through fraud and undue influence, and as a proximate result of Manuela's mental and physical weakness and susceptibility to influence, caused Manuela to execute a grant deed ("Deed") conveying the House to Carmen. Carmen paid no consideration for the House and Manuela had no independent legal advice before executing the Deed. Carmen concealed the executed Deed from Plaintiff, Cristina, and Victor and isolated Manuela from her family and friends. Following Manuela's death on November 8, 2008, Plaintiff sued Carmen to cancel the Deed and argued the Deed was a product of fraud and undue influence. 

The purpose of this article is to review the common law regarding cancellation of deeds and to present the presumptions, circumstances, and evidence that courts use to determine whether deeds were the product of fraud or undue influence. The next section gives several available presumptions. Sections III and IV give the circumstances that suggest the presence or absence of fraud and undue influence. Sections V and VI review applicable evidence law and available remedies. Bankruptcy issues and estate-planning recommendations are given in sections VII and VIII.

P.S. I Love You

Sue Johnston was married to John for 46 years.  Every Valentine's Day, he would send her flowers with the message: "My love for you grows."  John passed away, and on Sue's first Valentine's day alone after his death, she still received a gorgeous bouquet of flowers from John.  When Sue called the florist about this delivery, the florist explained that before John passed away, he prepaid for many years and asked the florist to continue sending bouquets to Sue on Valentine's Day.  The attached card on this first bouquet from beyond the grave read, "My love for you is eternal."

See Valentine's Gesture From Dead Husband to Wife Will Make You Melt, Huffington Post, Feb. 20, 2013. 

IRS Rules Income Interest is Intangible

The tax code provides an exemption from U.S. gift taxes for the transfer of intangible property by a person who is neither a resident nor citizen. The exemption applies only in certain situations, but has already caused some controversy. The controversy stems from the tax code, which fails to include the definition of "intangible" property.

In a recent case, a non-resident beneficiary of a trust disclaimed his interest. The disclaimer would have been exempted from the gift tax, but the beneficiary had already received the trust benefits. The beneficiary wanted the Internal Revenue Service (IRS) to find that the income interest was intangible property. This conclusion would classify the interest as a gift, and exempt the disclaimer from the gift tax. According to Rubin on Tax, the case turned on "whether one should look through the trust to look at the character of the trust assets that produce income (to determine if the assets were tangible or intangible, and if tangible, to see where they are located), or whether an income interest is inherently an 'intangible' regardless of what the trust assets are comprised of." The IRS ruled the income interest was intangible.

There are two limitations to the application of the ruling. One limitation is whether the state has a law already on the books about trust income and its classification. Another limitation is case law. One state's case law indicates that when an income beneficiary has no power over a trust the beneficiary does not have an ownership interest in trust assets. However, other states may reach a different result.

See Charles Rubin, Disclaimer of Income Interest was not Taxable for Nonresident, Rubin On Tax, Feb. 7, 2013.

Trustee's Duty To The Beneficiaries of a Trust

When trustees of a trust have a dispute, it is the duty of the trustee to follow the terms and the purpose of the trust and do what is in the best interest of all of the beneficiaries. However, often the trustee is compelled by the circumstances of the dispute to take a position, which may place him or her in an adverse position to one or more beneficiaries of the trust. So, the question remains as to how far a trustee can advocate for that particular side?

As I have previously discussed, the Supreme Court of New Hampshire recently ruled against one of the beneficiaries of a trust with an in terrorem clause. In this case, Elizabeth Tamposi challenged the terms of the trust and forfeited her right to draw from the trust. The trustee also challenged the ruling. Before the case could get to court, the beneficiary withdrew her appeal. The trustee, however, chose to move forward with the appeal. At the supreme court, "the other beneficiaries contended that the trustee did not have standing to challenge the ruling that the in terrorem clause was violated." The supreme court agreed with the other beneficiaries. The court noted that a trustee must act impartially "with respect to the various beneficiaries of the trust." The court reasoned that because the adverse ruling only affected one of the beneficiaries and she abandoned the appeal, "there was no reason for the trustee to pursue the appeal on her behalf." Therefore, the trustee lacked standing to bring the appeal.

See Luke Lantta, A Cautionary Tale About Trustees Picking Sides Between Beneficiaries, BryanCaveFiduciaryLitigation.com, Feb. 7, 2013.

Man Resigns After Noticing His W-2 Was Numbered 666

According to Accounting Today, "a Tennessee man has quit his job after receiving a W-2 tax form from his employer stamped with the number 666." The man, Walter Sionopas, left his job at Contech Casting Company because he believes that the number refers to the number of the Beast. Sionopas claims that by accepting the number he will accept Satan. His employer claims that the number is purely coincidental, as it is associated with the order that the W-2 forms were mailed to the employees.

Speaking of coincidences, it so happens that Sionopas was assigned this number before. Previously, he was assigned this number to clock in when he started working at his job. He complained and human resources had his number changed. When his company changed their clocking in system in 2011, can you guess what number Sionopas was assigned? Yes, 666. He resigned immediately and only returned to work when they changed his number again for him.

See Michael Cohn, Man Resigns From Job After Receiving A W-2 Numbered 666, Accounting Today, 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.

Article on Repealing Stepped-Us Basis

Edward J. McCaffery (Professor of Law, USC Gould School of Law) recently published an article entitled, A Progressive's Silver Lining Playbook: The Case for Repealing Stepped-Us Basis, USC Law and Economics Research Papers Series No. C13-3, Jan. 13, 2013. Provided below is the abstract from SSRN: 

In this brief commentary, to appear in a later version in Tax Notes, I argue that, now that we have no meaningful estate tax for the vast masses of even wealthy individuals and families, it is time to call for an end to stepped-up basis on death and to start doing something, somehow, to shut down the typical tax planning of the wealthy.

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

Four Ways to Avoid State Death Taxes

State estate and inheritance taxes can come as a surprise to many because they're focused on the federal changes that exempt most people from the federal estate tax.  But 21 states and the District of Columbia have 2013 estate and/or inheritance taxes. Forbes offers four ways to avoid state tax: 

1. Move

2. Credit shelter trust/bypass trust

3. Spousal lifetime access trust

4. Outright gifts

Please click here for more detail about each of these options. 

See Ashlea Ebeling, Four Ways to Beat State Death Taxes, Forbes, Jan. 28, 2013. 

Errors and Omissions Insurance

Most advisors buy Errors & Omissions insurance, but it is more important to prevent the need to use it in the first place. LifeHealthPro offers ten tips to keep you and your business safe in a litigious market:  

1. Be a consummate professional.

2. Do your research.

3. Stay in your expertise area.

4. Solicit business properly.

5. Practice full disclosure. 

6. Do thorough fact finding. 

7. Link your recommendations to documented needs. 

8. Educate clients about what they bought. 

9. Leave a paper trail. 

10. Promptly resolve client complaints.

See Harry Lew, 10 Tips to Prevent an E&O Claim, LifeHealthPro, Jan. 17, 2013. 

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

Permanent Estate Tax Won't Affect Most

After much change over the past decade, the federal estate tax has finally become permanent.  Tables from the Tax Policy Center show that, in 2013, fewer than 1 in 700 estates will owe the tax and they will pay a total of $14 billion, which is half of the revenue collected five years ago. 

Most estates will now pass to heirs tax-free, so the higher 2013 tax rate does not effect the nearly 99.9% o estates exempt from estate tax.  But those who are subject to the tax will have a significantly higher tax bill.  

See Robertson Williams, Finally, A Permanent Estate Tax, Though Just for Wealthy Few, Forbes, Feb. 7, 2013. 

 

Date Insurance To Recover Costs of A Bad Date

With Valentine's Day coming up, date insurance might be helpful in the event of a disasterous date. Confused.com is offering a trial version of date insurance to help women recover money spent on dates gone wrong.  Confused.com found out that single women have to pay up to £400 more for car insurance than married women. That combined with the survey results indicating that 76% of dates don't work out sparked Confused.com's interest in offering the program. 

When asked why dates went wrong, 27% of respondents said they didn't "'fancy'" their date, 9% said they found dates boring and 22% said there was no chemistry.  To trial the new date insurance, Confused.com is requesting that site visitors submit their bad date experiences.  Some have reported trips to a sewage station, a trip to a coffin factory, and a prison visit to meet the parents. 

See Confused.com Unveils Date Insurance, With the Worst First Dates Including a Visit To a Coffin Factory, TheDrum, Feb. 8, 2013. 

Alleged Fraud Surrounding a Gianni Agnelli Family Connection

As I previously discussed,the legal battles surrounding the estate of Gianni Agnelli, former chairman of Fiat, finished several years ago. However, a man named Billy Jack Hebrew has resurrected the Agnelli estate battle when he allegedly defrauded investors of at least $1 million dollars by claiming a family connection to the Agnelli family. Specifically, Hebrew declared that he was an heir to the Fiat estate. Now, Delaware LLC, Meta4, Colleen Camp, and John Degraye sued Hebrew, Cort Javarone, and Campfire Productions. The complaint states that Hebrew changed his name and misrepresented to the plaintiffs that he was the illegitimate son of Edoardo Agnellito and that his worth was over a billion dollars. Plaintiffs believe Hebrew concocted this story to gain credibility with his new business partners. Camp and Degraye did believe these claims and invested in the defendants' business. The complaint states that Hebrew had no actual connection to the Agnelli family.

According to Courthouse News Service, the complaint asserts the defendants run a film and technology company called the Spark Technology Fund. The defendants allegedly solicited investors for Spark by using plaintiffs' relationships with actors and directors in the movie industry without permission. Additionally, Camp and Degraye also claim that the defendants used their names and photos without permission to promote the Spark Technology Fund. The complaint goes on to accuse the defendants of making false promises about producing movies by using the Agnelli family connection as leverage. Among a couple of other requests Camp and Degraye seek preservation of documents, disbandment of Campfire Productions, and the rescission of the LLC agreement. 

See Sean Kelly, An Heir to the Fiat Fortune, Hey?, Courthouse News Service, Feb. 7, 2013.

Lottery Winner's Widow Provides Proof For Her Stake In Estate

As I have previously discussed, Urooj Khan died from cyanide poisoning after he won the lottery sparking an estate battle over his winnings. Most recently, I discussed how his body was exhumed so that an autopsy could be performed to determine the cause of his death. Now, it appears that Shabana Ansari Khan, through her attorney, has provided a document signed by Urooj Khan "stating that his portion of his dry cleaning business [should] go to his wife if he died." This "operating agreement" was presented in lieu of a formal will because Khan died intestate. With this operating agreement, Khan's widow would receive two-thirds of the estate including his share of his business. The agreement itself is the product of an agreement with Khan's former business partner. 

Khan's brother disputes the agreement and is confused as to why his brother would sign such an agreement unless he knew of his death. Ansari's attorney stated that his brother's opinion is irrelevant because the law is the law, and legally Ansari owns his part of the business. Khan's widow claims that she only recently discovered the clause after the judge asked for an inventory of the estate.

See Susanna Kim, Poisoned Lotto Winner's Widow Said She Has Proof of Her Estate Claim, ABC, Feb. 8, 2013; see also Jason Meisner & Jeremy Gorner, Man Who Mysteriously Died After Winning Lottery Had Made Business Deal For Wife's Benefit, Chicago Tribune, Feb. 7, 2013.

Top SSRN Downloads

Here are the top downloads from November 21, 2012 to January 20, 2013 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	199	Occupy the Tax Code: Using the Estate Tax to Reduce Inequality Paul L. Caron, James R. Repetti, University of Cincinnati - College of Law, Boston College - Law School, Date posted to database: January 14, 2013 Last Revised: January 14, 2013
2	144	Wimmer Wins FLP Annual Exclusions Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: January 29, 2013 Last Revised: January 29, 2013
3	69	Extinguishing and Amending Tax-Deductible Conservation Easements: Protecting the Federal Investment after Carpenter, Simmons, and Kaufman Nancy A. McLaughlin, University of Utah S.J. Quinney College of Law, Date posted to database: December 27, 2012 Last Revised: February 6, 2013
4	66	Family Caregiving and the Law of Succession: A Proposal Thomas P. Gallanis, Josephine Gittler, University of Iowa - College of Law, University of Iowa - College of Law, Date posted to database: December 29, 2012 Last Revised: January 25, 2013
5	58	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
6	45	Charitable Insolvency and Corporate Governance in Bankruptcy Reorganization Reid K. Weisbord, Rutgers University School of Law - Newark, Date posted to database: December 14, 2012 Last Revised: December 14, 2012
7	36	Informal Carers and Private Law Introduction Brian Sloan, University of Cambridge - Robinson College, Cambridge, Date posted to database: December 21, 2012 Last Revised: January 23, 2013
8	30	Distracted from Distraction by Distraction: Reimagining Estate Tax Reform Edward J. McCaffery, University of Southern California - Law School, Date posted to database: January 18, 2013 Last Revised: January 19, 2013
9	21	Trusts in België: Liaisons Dangereuses (Trust in Belgium: Dangerous Liaisons) Alain-Laurent Verbeke, University of Leuven, Faculty of Law, Department of Private Law, Date posted to database: December 9, 2012 Last Revised: December 9, 2012

Now Is the Winter of our Discontent Made Glorious Summer By the Discovery of Richard III

As I have previously discussed, the remains of Kind Richard III were recently found beneath a parking lot near Leicester. Now, two different cities are vying for the rights to the bones of the late monarch. Leicester officials believe that King Richard III should be laid to rest within the city's cathedral. However, opponents argue that this option is inappropriate because many literary works portray King Richard III as a villain to Leicester; therefore, those opponents argue "that he should be laid to rest in York...where he was considered a local king." Leicester was a stronghold for the House of Lancaster, Richard's political opponents for the throne. Therefore, some consider that it would be inappropriate to bury Richard in the city.

See Martha Neil, Newly Found Skeleton of Richard III Creates Winter of Discontent For 2 Cities Vying to Claim Bones, ABA Journal, 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.

What the Millionaires Give for Valentine's Day

Spectrem Group L.L.C. surveyed investors with a net worth greater than $5 million about how they would celebrate Valentine's Day. Their findings are below: 

• Buy a card-45%
• Buy flowers-18%
• Buy chocolate-11%
• Buy jewelry-3%
• Buy other gifts-9%
• Go out to dinner-40%
• Weekend getaway-6%
• Do not celebrate Valentine's Day-18%

See Warren S. Hersch, What do Multi-millionaires Give on Valentine's Day?, LifeHealthPro, Feb. 8, 2013.

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

Famous Author, Private Funeral

Charles Dickens, the author of great literary works such as Great Expectations and A Tale of Two Cities, had a rather humble will. Provided below is an excerpt of the last few lines of the will.

I emphatically direct that I be buried in an inexpensive, unostentatious, and strictly private manner; that no public announcement be made of the time or place of my burial; that at the utmost not more than three plain mourning coaches be employed; and that those who attend my funeral wear no scarf, cloak, black bow, long hat-band, or other such revolting absurdity. I direct that my name be inscribed in plain English letters on my tomb, without the addition of 'Mr.' or 'Esquire.' I conjure my friends on no account to make me the subject of any monument, memorial, or testimonial whatever. I rest my claims to the remembrance of my country upon my published works, and to the remembrance of my friends upon their experience of me in addition thereto. I commit my soul to the mercy of God through our Lord and Saviour Jesus Christ, and I exhort my dear children humbly to try to guide themselves by the teaching of the New Testament in its broad spirit, and to put no faith in any man's narrow construction of its letter here or there. In witness whereof I the said Charles Dickens, the testator, have to this my last Will and Testament set my hand this 12th day of May in the year of our Lord 1869.

For a complete transcript of his will you can access it here.

Oscars Honor Deceased Celebrities

Every year the Academy Awards honors recently deceased celebrities from the movie industry. The tradition started in 1994, and will continue this year on February 24, 2013. In the past, a performer sings a sentimental song while the memorial is displayed. An anonymous committee at the Academy of Motion Picture Arts and Sciences is deliberating who the next 30 or so honorees will be. Anonymity limits hard-line campaigning for the honoree spots. The number of celebrities memorialized has fluctuated over the years. The longest list included 48 names, while the shortest list included only 23.

Some more favored names for the honoree spots this year include Lois Smith, Ernest Borgnine, Nora Ephron, Richard Zanuck and Marvin Hamlisch.The committee is weighing celebrity status, achievements, and awards. Former president of the Academy, Tom Sherak, disclosed there is an increase in the number of people deciding the memorial segment of the award show. Celebrities remembered are not limited to academy members. Recently, a more inclusive approach has allowed people who were not in the limelight to get recognition for their contributions. 

See Michael Cieply, Even for the Dead, There's a Race to Make the A-List at Oscars, The New York Times, Feb. 7, 2013. 

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

Happy Chinese New Year!!