Wills, Trusts & Estates Prof Blog

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

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Tuesday, September 16, 2014

Article on Frank Aragona Trust v. Commissioner

TrustDana M. Foley & William I. Sanderson recently published an article entitled, Frank Aragona Trust v. Commissioner: A Road Map to What Really Matters for Material Participation of Trusts, 28 Probate & Property No. 5 (Sept. & Oct. 2014).  Provided below is an excerpt from the introduction of the article:

Just weeks before the first income tax returns were filed, reporting income subject to the new 3.8% net investment income tax (the “NII Tax”), the Tax Court issued the much anticipated decision in Frank Aragona Trust v. Commissioner, 142 T.C. No. 9 (Mar. 27, 2014) (“Aragona Trust”). This regular published opinion followed a trial before the Hon. Richard T. Morrison and was issued 15 months after the NII Tax came into effect under IRC § 1411.

September 16, 2014 in Articles, Estate Planning - Generally, Income Tax, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, September 15, 2014

Article on Inherited IRAs

IRALester B. Law & Bryan D. Austin recently published an article entitled, Inherited IRAs: Tragedy or Planning Opportunity—Clark v. Rameker, 28 Probate & Property No. 5 (Sept. & Oct. 2014).  Provided below is an excerpt from the article:

In Clark v. Rameker, 573 U.S. __ (2014) (No. 13-299), the Supreme Court unanimously held inherited IRAs are not exempted “retirement accoutns” under the federal Bankruptcy Code. This article summarizes the facts, outlines the judicial history, examines the rationale, and provides some insights into planning for IRAs in light of the new case.

    Like many cases, Clark is akin to a theatrical production.

        Act I—The Creation and Inheritance

Scene I—The Creation

The curtain rises.

    It is the new millennium and Ruth Heffron (Ruth) visits her financial advisor to establish a Traditional IRA, naming her daughter, Heidi Heffron-Clark (Heidi), as the beneficiary. Though uncertain, the audience believes that the IRA was probably rolled over from Ruth’s deferred compensation account (for example, her 401k).

September 15, 2014 in Articles, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Sunday, September 14, 2014

Article on Defining Parentage for Lenders of Genetic Material

Lynda Wray BlackLynda Wray Black (University of Memphis - Cecil C. Humphreys School of Law) recently published an article entitled, The Birth of a Parent: Defining Parentage for Lenders of Genetic Material, Nebraska Law Review, Vol. 92, 2014. Provided below is the abstract from SSRN:

With the advances in assisted reproductive technology, the scholarly quest for an all-inclusive legal definition of parentage has proliferated. All too often this quest becomes muddled in Constitutional tangles, in shifting mores, in quagmires of evolving and inconsistent legal parameters on what constitutes a “family”, and in the perceived need to reconcile conflicting state laws governing marriage, adoption and surrogacy contracts. This article suggests a return to the basics. Parents are born with the birth of a child. Notwithstanding the scientific breakthroughs in reproductive technology and the more inclusive modern understanding of the family unit, every child begins with two (and only two) suppliers of genetic material and one (and only one) gestational carrier. Thus, the only logically clear starting point for a legal definition of parentage begins with these three claim-holders to parentage. Once the examination of the concept of parentage is disentangled from the complications of related, but logically independent, legal questions, it becomes clear that unless and until the rights and obligations of parentage are either (voluntarily) contractually waived or (involuntarily) judicially or statutorily terminated, the law must recognize as parent any individual (regardless of his or her gender, sexual orientation or marital status) who is biologically related to a child.

September 14, 2014 in Articles, Estate Planning - Generally, Science, Technology | Permalink | Comments (0) | TrackBack (0)

Saturday, September 13, 2014

Article on Trusts and Estates: Implementing Freedom of Disposition

Robert SitkoffRobert H. Sitkoff (Harvard) recently published an article entitled, Trusts and Estates: Implementing Freedom of Disposition , 58 St. Louis U. L.J. 643 (2014). Provided below is an excerpt from the article: 

The Trusts and Estates course is about the law of gratuitous transfer at death, that is, the law of succession.1 Lately such courses have come to cover both probate succession by will and intestacy, and nonprobate succession by inter vivos trust, pay-on-death contract, and other such will substitutes. The organizing principle of the American law of succession, both probate and nonprobate, is freedom of disposition. My suggestion in this Essay, which I have implemented in my Trusts and Estates class and in the casebook for which I am the surviving coauthor,2 is that the Trusts and Estates course can likewise be organized around this principle. The Trusts and Estates course is perhaps best conceptualized as a survey of the law and policy of implementing freedom of disposition.3


The American law of succession embraces freedom of disposition, authorizing dead hand control, to an extent that is unique among modern legal systems.4 Within the American legal tradition, a property owner may exclude his or her blood relations and subject his or her dispositions to ongoing conditions, as in the classic teaching case of Shapira v. Union National Bank.5 The right of a property owner to dispose of his or her property on terms that he or she chooses has come to be recognized as a separate stick in the bundle of rights called property.6

There are, of course, some limits on freedom of disposition. The law protects a decedent’s creditors and surviving spouse, and it imposes a handful of other policy limitations, such as the Rule Against Perpetuities. Gratuitous transfer of property, whether during life or at death, is also subject to wealth transfer taxes.7 For the most part, however, the American law of succession facilitates, rather than regulates, the carrying out of the decedent’s intent. Most of the law of succession is concerned with enabling posthumous enforcement of the actual intent of the decedent or, failing this, giving effect to the decedent’s probable intent.8

Notice the emphasis on the donor rather than the donee. The interest protected by the law of succession is the donor’s right to freedom of disposition. The interest of a prospective donee, being derivative of the donor’s freedom of disposition, does not harden into a cognizable legal right until the donor’s death. Until then, a prospective beneficiary has a mere expectancy that is subject to defeasance at the donor’s whim. Consequently, the justification for freedom of disposition must be found in the balance of the “proper rewards and socially valuable incentives to the donor”9 against the risk of perpetuating inequality and concentrating economic and political power.

Along with the nature and function of freedom of disposition, it is convenient at the outset of the Trusts and Estates course to consider the professional responsibility of lawyers in succession matters. Doing so alerts students to the ethical perils in trusts and estates practice,10 and it invites consideration of the role of the trusts and estates lawyer as family counselor. Because the exercise of freedom of disposition at death is the decedent’s final expressive act, the Trusts and Estates course is fundamentally about people and their most intimate relationships. Each case is a drama in human relationships and a cautionary tale.

September 13, 2014 in Articles, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, September 12, 2014

Article on Protecting Your Clients’ Assets from Their Future Ex-Sons and Daughters-in-Law

Wedding moneyChristopher J. Roman (Villanova Law School) recently published an article entitled, Protecting Your Clients’ Assets from Their Future Ex-Sons and Daughters-in-Law: The Impact of Evolving Trust Laws on Alimony Awards, 39 ACTEC Law Journal No. 1 & 2 (Spring/Fall 2013).  Provided below is an excerpt from the introduction of the article

Since the dawn of modern estate planning, parents have sought to keep wealth “in the family” and protected from the reach of their descendants’ creditors. To achieve this objective, estate planners have often implemented discretionary trusts to shield beneficiaries’ assets from their own misjudgments. For the modern parent, with nearly fifty percent of first marriages ending in divorce,1 the most threatening creditor has become a future ex-son or ex-daughter-in-law.

As we continue through this era with a high rate of divorce and an increasing number of children becoming beneficiaries of trusts from past generations, the confluence of these two factors has created a tension between trust law and matrimonial law that has become the subject of an increasing number of cases across the county. This tension has pushed trust law and matrimonial law to evolve in tandem as more and more divorce cases involve a trust for the benefit of one of the parties. A critical issue in these divorces becomes whether potential distributions to the beneficiary-spouse after the divorce should be included as a source of income for the purposes of calculating alimony. This issue gives rise to the following dilemma for the court: since the court cannot determine whether the future distributions will be made, can the court presume that distributions will be made or, alternatively, can the court compel the trustee of the trust to make distributions to the beneficiary to ensure that the alimony obligation is satisfied?

The evolution of the law with respect to these issues is highlighted in a recent Supreme Court of New Jersey decision, Tannen v. Tannen,2 which examines whether a court can compel future distributions from a discretionary trust and, thereby, include those distributions as a source . . .

September 12, 2014 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Thursday, September 11, 2014

Article on the Trust for Manumissions


Jessica Lee Thompson (UNC Chapel Hill School of Law) recently published an article entitled, ‘Toward Freedom for All’: North Carolina Quaker Legal Theory on the Trust for Manumissions (April 30, 2014).  Provided below is the abstract from SSRN:

The Perquimans event was the spark to one of the greatest legal debates in North Carolina’s history as Quakers directly challenged the state supported institution of slavery and conceptions of property through the use of trusts as a technology of law in conjunction with the exercise of their religious liberty. That is, they used the trust as a way for members of the local Meeting to hold slaves for the "benefit" of the Meeting and thus comply with the requirements of the North Carolina law that slaves have owners. Yet, the trustees, apparently following the wishes of the Meeting, allowed the slaves they "owned" substantial freedom, which in essence circumvented the North Carolina statute’s requirement that the slaves have owners. The Quakers’ challenges to the institution of slavery went beyond their defiance of acts passed by the General Assembly, which specifically contemplated the "Quaker issue." The debate over Quaker slaves held in trusts would largely unfold in the North Carolina courts. The legal theories the Quakers advanced challenged the common law and divided members of the State’s highest court on questions of morality. The Quakers use of trusts and natural law principles to accomplish a moral objective run’s counter to Morton Horwitz’s instrumental conception of law, and proposes an alternative theory, namely that those in power were more motivated by their fears or concern for security and stability.

This paper traces the debate over the legality of Quaker manumission efforts in North Carolina through an examination of three major cases presented before the North Carolina Supreme Court between 1827 and 1851. It combines research in the Quaker archives with an examination of the trial records and the record in the Supreme Court, as well as the published opinions. Thus, this paper moves beyond the previous work that has either looked only at the Quaker records and not the legal records or the North Carolina Supreme Court’s published opinions without telling the full story of the record below. A central question for this paper is how dissenters turned to the neutral technology of law to achieve a result that was at least partially at odds with the established policy of the state? That raises subsidiary questions about the ways that one renowned North Carolina lawyer, William Gaston, sought to defend his use of the innovative strategy and how North Carolina jurists responded to this challenge to state policy. This paper, thus, lies at the intersection of a series of questions about religious freedom, legal innovation, policy, and stare decisis.

September 11, 2014 in Articles, Estate Planning - Generally, Religion, Trusts | Permalink | Comments (0) | TrackBack (0)

Article on Planning for Year 2017 Offshore Deferred Compensation Arrangements

ShoreN. Todd Angkatavanich, Jonathan G. Blattmachr, and James R. Brockway recently published an article entitled, Coming Ashore - Planning for Year 2017 Offshore Deferred Compensation Arrangements: Using CLATs, PPLI and Preferred Partnerships and Consideration of the Charitable Partial Interest Rules, 39 ACTEC Law Journal No. 1 & 2 (Spring/Fall 2013).  Provided below is an excerpt from the introduction of the article: 

For estate and tax practitioners who represent hedge fund managers, the practice can be an interesting one coupled with special challenges from an estate, gift and generation-skipping transfer tax (collectively herein sometimes referred to as “transfer taxes”) standpoint as well as from an income tax point of view. It is often the case that the representation of these clients involves issues that straddle both the transfer tax and income tax sides of the law. This is certainly the case when attempting to plan for the fund principal (that is, the principal manager of an investment vehicle such as a hedge fund) to address the looming year 2017 deadline for recognition of income on certain nonqualified deferred compensation arrangements.

As the deadline rapidly approaches for fund managers to recognize income tax on deferred compensation arrangements that are not otherwise subject to an ongoing risk of forfeiture, tax advisors are scrambling to find the best solution or solutions to address the substantial (and in some cases, even massive) income tax burden that the fund principal/client may be facing. 

Many clients are not waiting until 2017 to recognize the income on these arrangements and have opted to bring the deferred compensation “on shore” and recognize the income currently. For those clients who may be charitably inclined, planning to address this income tax burden might involve generating a current year charitable income tax deduction to offset at least part of the tax liability. If done by way of a Charitable Lead Annuity Trust (“CLAT”) that is a “grantor trust” for income tax purposes,1 the fund manager may achieve the dual goals of generating a . . .

September 11, 2014 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 10, 2014

Article on California Income Taxation of Trusts and Estates

Tax1Richard S. Kinyon (Shartsis Friese LLP), Kim Marois (Clement, Fitzpatrick & Kenworthy, Inc.) Sonja K. Johnson (Anderson Yazdi Hwang Minton + Horn LLP) recently published an article entitled, California Income Taxation of Trusts and Estates, 39 ACTEC Law Journal No. 1 & 2 (Spring/Fall 2013).  Provided below is an excerpt from the article:

California’s income taxation of trusts has unpleasantly surprised many trust fiduciaries and beneficiaries. Its unique method of taxation, based on the residence of the trust’s fiduciaries and beneficiaries (and regardless of the residence of the settlor), may affect trustees and beneficiaries (as well as their lawyers and other advisors) far beyond the California borders.

For example, consider an irrevocable, non-grantor trust1 established by an Illinois resident that is administered by two co-trustees, one of whom is an Illinois resident and the other of whom is a California resident. All beneficiaries of the trust also reside in Illinois. Despite the predominately non-California connections, and even if the Illinois cotrustee is more actively involved in the administration of the trust, half of the trust’s undistributed net income is currently taxable by California.

Alternatively, consider another irrevocable, non-grantor trust, this time with a New York settlor. In this case, the trust is administered in New York by a New York resident serving as the sole trustee. However, the trust’s sole beneficiary is a California resident with a vested (i.e., non-contingent) interest in the trust property. Despite the trust’s New York origin and administration, all of the trust’s undistributed net income is currently taxable by California.

September 10, 2014 in Articles, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 9, 2014

Article on The Federal Tax Treatment of Disclaimers of Future Interests

Gift BoxTrent S. Kiziah recently published an article entitled, The Federal Tax Treatment of Disclaimers of Future Interests: A Call for Reform, 39 ACTEC Law Journal No. 1 & 2 (Spring/Fall 2013). Provided below is the abstract of the article:

Federal tax laws essentially preclude individuals with a future interest from disclaiming because the time in which a qualified disclaimer can be executed may pass before the person becomes aware of the interest and long before the interest becomes possessory and fixed as to quality and quantity. This article examines the state of the law prior to enactment of these limiting tax provisions, examines the call for reform by commentators, and examines the legislative history resulting in the current law. The author asserts Congress made an informed decision albeit a poor one. The author recommends Congress revisit the issue and enact legislation to permit an individual to disclaim within a reasonable period of time after the later of occur of (1) becoming aware of the future interest or (2) the future interest becoming indefeasibly fixed.

September 9, 2014 in Articles, Estate Planning - Generally, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Monday, September 8, 2014

Article on California's Right of Publicity Statute

Right of publicity

Lydia B. Yerrick (Southwestern Law School) recently published an article entitled, Live! For One Life Only?: The Need to Amend California's Post-Mortem Right of Publicity Statute to Better Protect the Dead and Their Heirs from Holographic Exploitation, 43 Sw. L. Rev. 349-370 (2013). Provided below is a portion of the article’s introduction:

If you could see any artist in concert, dead or alive, who would it be? Die-hard music fans have been asking one another this question for decades. Few people thought that their fantasy concert could ever become a reality through the creation of hyper-realistic, live performance “holograms.” Even fewer people paused to consider the myriad of intellectual property issues implicated by such a performance. This Comment seeks to explain why the heirs to a deceased artist’s right of publicity may not actually have the right to control holographic uses under California’s current post-mortem right of publicity statute and proposes legislative solutions to close these loopholes.

September 8, 2014 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)