Wills, Trusts & Estates Prof Blog

The Personal Injury Settlement -- Trust Law Interface

Henry L. Strong (Chairman and President, JMW SettleMaster) and David M. Cordell (Director of Finance Programs, University of Texas at Dallas) have recently published their article entitled Fiduciary Focus: The Prudent Integration of Structured Settlements and Post-Settlement Trusts, The Brief, Spring 2008, at 44.

Here is an excerpt from the article's introduction:

This article outlines key distinctions between structured settlements and post-settlement trusts, articulates how these differences affect returns on a risk-adjusted basis, and demonstrates how a thoughtful integration of both can deliver vastly superior results over those obtained by either vehicle alone.  By clearing up the confusion over how best to allocate settlement proceeds, we hope not only to assist members of the bar and judiciary but also to materially aid injured claimants.  We conclude the article by offering practice tips to help avoid problems.

HIPAA Explained

Michael W. Drumke (Partner, Schiff Hardin LLP) has recently published his article entitled A HIPAA Primer, The Brief, Spring 208, at 34.

In his comprehensive article, Mr. Drumke covers:

• Health care portability
• Health care fraud and administrative simplification
• Standards for electronic exchange of health information
• Business associate contracts
• Constitutional challenges to HIPAA
• The impact of HIPAA on litigation and state regulations
• Recommendations for sound HIPAA policy

The RAP - Trust Situs Interface

Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) and Max M. Schanzenbach (Benjamin Mazur Professor of Law, Northwestern Law)have recently posted on SSRN their article entitled Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds.

Here is the abstract of their article:

This chapter provides an accessible overview of our previous work on the impact of the abolition of the Rule Against Perpetuities (RAP) on trust fund situs. The implementation of the Generation Skipping Transfer (GST) Tax by the Tax Reform Act of 1986 sparked a movement to repeal the RAP. Since 1986, nearly half the states have abolished or effectively abolished the RAP as applied to interests in trust. Prior to 1986, only three states had abolished the RAP. We find no evidence that abolishing the RAP prior to the 1986 GST tax attracted trust business. By contrast, between 1986 and 2003, abolishing states reported an average increase in trust assets of $6 billion (a 20 percent increase). In addition, average account size in abolishing states increased by $200,000, implying that abolishing the rule attracted relatively larger trusts. Our findings imply that roughly $100 billion in trust funds have moved to take advantage of the abolition of the RAP. Further, we can trace these results to the subset of abolishing states that did not levy a tax on income accumulated in trusts attracted from out of state. This finding, which implies that abolishing the RAP does not directly increase state tax revenue, bears on the scholarly debate over the mechanisms of jurisdictional competition. Our analysis also controls for whether a state validated the so-called self-settled asset protection trust (APT). We did not find consistent evidence that validating APTs increases a state's reported trust business, but in the period studied few states had validated APTs, so we draw no firm conclusions.

We conclude that the jurisdictional competition for trust funds is real and intense, with the primary margin of competition being the rules that bear on trust duration, and that the enactment of the GST tax sparked the rise of the perpetual trust. In future work using more refined data, we intend to revisit the jurisdictional competition for trust funds and to expand our inquiry to include directed trustee statutes and the recent reforms to trust-investment laws.

An Overlooked Aspect of Estate Planning -- Property & Casualty Insurance

Michael S. Arlein (senior associate in the Personal Planning Group of Patterson Belknap Webb & Tyler LLP) and Timothy O'Brien (Director of Private Client Services at Cook, Hall & Hyde, Inc.) have recently published their article entitled Will State Farm Be There? Often Overlooked Property And Casualty Insurance Aspects Of Common Estate Planning Transactions, Practical Tax Lawyer, Summer 2007, at 7.

Here is the introduction to their article:

A number of the most common estate planning techniques recommended by practitioners involve the transfer of a client’s personal residence to an entity such as a limited liability company, limited partnership, or trust. Estate planning attorneys recommend such transfers for a number of reasons, including protection from creditors, avoidance of probate, facilitating gifting of fractional interests in a residence, and providing a mechanism for the management of property owned by multiple individuals or families. Transferring residential property to a qualified personal residence trust also remains a popular and effective strategy for gifting.

When implementing these “bread-and-butter” estate planning techniques, practitioners often neglect a crucial aspect of the transaction—restructuring the property and casualty insurance that is in place to reflect the transfer of ownership of the residence to an entity. In the event of a loss, the failure to address this issue could have unintended and potentially devastating consequences. This article focuses on the need to properly structure homeowner insurance policies, which are commonly used to protect residences that are transferred to an entity.

ERISA, Trust Law, and the Appropriate Standard of Review

Joshua Foster (J.D. Candidate, June 2008, St. John's University School of Law) has recently published his Note entitled ERISA, Trust Law, and the Appropriate Standard of Review: A De Novo Review of Why the Elimination of Discretionary Clauses Would be an Abuse of Discretion, 82 St. John's L. Rev. 735 (2008).

Here is an abstract of his article:

Since the Supreme Court’s landmark decision in Firestone Tire & Rubber Co. v. Bruch, circuits have routinely upheld the use of discretionary clauses in insurance policies.  As the name implies, discretionary clauses allocate significant discretion to plan administrators, and decisions made by the administrators are reviewed under an arbitrary and capricious standard as opposed to de novo.  In early 2006, the New York Insurance Department issued two advisory circular letters maintaining that the use of discretionary clauses in insurance policies violates New York Insurance laws, and threatened to pass legislation banning their use.  However, allowing the New York Insurance Department to succeed in eliminating discretionary clauses will deprive the judicial system of its discretionary function in direct contradiction to the trust law the insurance scheme is built upon.  Additionally, many policy concerns including cost to policyholders and principles of judicial efficiency would be undercut by these changes.   This note argues that the legislature should not change the current scheme and consequently alter the judicial role, because the current scheme adequately protects the interested parties and is consistent with trust law that underlies ERISA and state insurance law.

Top SSRN Downloads

Here are the top downloads from March 12, 2008 to May 11, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	390	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	132	Caregiving and the Case for Testamentary Freedom Joshua C. Tate, Southern Methodist University - Dedman School of Law, Date posted to database: March 25, 2008 Last Revised: May 9, 2008
3	124	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
4	103	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
5	82	Rector and Gore: Two Recent Flp Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: March 4, 2008 Last Revised: May 2, 2008
6	57	Serve the Cheerleader - Serve the World: Representation in Estate and Trust Proceedings and under the Uniform Trust Code and other Modern Trust Codes Martin D. Begleiter, Drake University Law School, Date posted to database: January 9, 2008 Last Revised: January 9, 2008
7	51	Text and Time: A Theory of Testamentary Obsolescence Adam J. Hirsch, Florida State University College of Law, Date posted to database: April 9, 2008 Last Revised: May 9, 2008
8	49	General Principles of Intestate Succession Under Hindu Law Tarun Jain, London School of Economics & Political Science (LSE), Date posted to database: January 30, 2008 Last Revised: May 3, 2008
9	42	More is Not Always Better than Less: An Exploration in Property Law Daphna Lewinsohn-Zamir, Hebrew University - Faculty of Law, Date posted to database: March 4, 2008 Last Revised: March 12, 2008
10	39	Disclaimers and Defined Value Clauses: Christiansen Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: April 8, 2008 Last Revised: May 5, 2008

Will Formalties -- Should Noncompliance be Excused?

Matthew D. Owdom has recently published his casenote entitled Post-death Subscription: The Protective Function Reborn, 39 McGeorge L. Rev. 359 (2008).

Here is an excerpt from the introduction to his article:

Many beneficiaries have been unfortunate enough to discover that a testator's failure to comply with testamentary execution requirements carries a heavy price. In recent decades, many states have taken steps to mitigate the impact of formal attestation requirements on expressions of testamentary intent.  This modern response embodies a liberal attitude towards formalities in the law of wills, indicating that the once-solid foundation of execution requirements is crumbling. Indeed, commentators have opined that attestation formalities may be “withering away,” and some have called for their outright elimination.  Despite these developments, the recent decision by the California Supreme Court in Estate of Saueressig indicates that formalities are far from extinct.

In Saueressig, the court held that California Probate Code section 6110 prohibits the completion of attestation requirements after the death of the testator.  The court's narrow interpretation of section 6110 constitutes a significant deviation from modern trends in the law of wills. Given the viability of holographic wills and will substitutes in California, all of which undermine the functions of execution formalities, Saueressig appears, upon first glance, to embody a result inconsistent with the prevailing wisdom of the law of wills.

Nevertheless, this Casenote argues that the bright-line rule adopted in Saueressig is superior to the “reasonable time” rule adopted by other jurisdictions and promulgated in the 1990 Uniform Probate Code (UPC). Consistent with the normative conception of formal functions, its primary benefit lies in its protection of the testator from fraud or mistake.  In addition, the Saueressig approach promotes uniformity, predictability, and administrative efficiency.  While Saueressig's holding is laudable, the court's reasoning is less than clear, leaving several unresolved questions.

This Casenote contends that Saueressig illustrates three key points. First, from a policy standpoint, the Saueressig rule maximizes the utility of the protective function of attestation formalities following the 1983 reforms to the California Probate Code. Implicit in this point is an assertion that the once-discredited protective function has undergone a legitimizing “rebirth” in the limited context of post-death subscription. Second, although its result is sound, Saueressig embraces the deeply-rooted but erroneous legal proposition that post-death subscription is incompatible with the temporal nature of the will instrument. Finally, Saueressig demonstrates the judicial tendency to interpret modern, minimalist wills acts in a manner inconsistent with the prevailing liberal attitude towards formalities.

Part II begins by surveying the legal background of Saueressig, including the conflicts in the California appellate courts that generated the Saueressig case and the competing rule adopted in other jurisdictions. Part III provides an in-depth look at the Saueressig case. Finally, Part IV analyzes the implications of the rule adopted in Saueressig.

Have Non-Probate Transfers Gone Too Far?

Kent Schenkel (Associate Professor, New England School of Law) has recently posted on SSRN his article entitled Testamentary Fragmentation and the Diminishing Role of the Will: An Argument for Revival.  This article is scheduled for publication in 41 Creighton L. Rev. 155 (2008).

Here is the abstract of his article:

Popularized by a desire to avoid the complexities and inefficiencies of probate, the now ubiquitous nonprobate system of transferring property at death brings a wealth of complexities and inefficiencies of its own. Our patchwork system of will substitutes, while undeniably simplifying post-death administration, requires more documentation, techniques, and tasks than ever before. On the positive side, our experiences with nonprobate transfer techniques revealed flaws in testamentary transfer laws that are now being addressed. But exposure of ancillary problems with wills laws is only a byproduct of the nonprobate revolution. If we are to reign in fragmentation and its consequent ponderousness and inefficiency we must admit that our aversion to probate, not wills, is driving the proliferation of wills substitutes. Ironically, the will, the instrument whose undesirable post-death characteristics spawned the turn towards alternative techniques, offers a simple and efficient mechanism for channeling a person's testamentary desires. The only significant impediment to reviving the will as the instrument of choice for this purpose is that wills carry the burden of probate. But because probate is now seen as largely unnecessary in many estates, legislation should focus on relieving wills from that burden.

Breach of Gift Condition?

Louisa Lippitt died in 1912 leaving $4,000 in her will to the Rhode Island Hospital conditioned on the money being used to provide a permanent free bed for needy patients as selected by Children's Friend and Service (the successor charity to the one Louisa indicated in her will).

It now appears that the free bed no longer exists.  Accordingly, Children's Friend and Service has filed suit.

Here is some additional information from Eric Tucker, Charity sues R.I. hospital over free bed donated century ago, Townhall.com, April 19, 2008:

"It just seems illogical to me that a quote-unquote 'permanent free bed,' which by its very name suggests that it is to last forever, can somehow not last forever," said Mark Swirbalus, a lawyer for the organization.

If it had been modestly invested, Swirbalus said, Lippitt's donation could be worth about $1.5 million today. * * *

Hospital spokeswoman Gail Carvelli said the money donated for free beds was put into a restricted account that pays for charity care, but she could not say how much was in that account or how much of its funds are spent annually.

Swirbalus said Children's Friend does not expect the hospital to set aside a bed that would be available only to the charity's clients. Rather, the charity wants to ensure its clients receive free care in whatever bed they're treated.

Moving the Situs of a Trust

Richard W. Nenno, (Managing Director and Trust Counsel, Wilmington Trust Company) has recently published his article entitled The Trust from Hell: Can It Be Moved to a Celestial Jurisdiction?, Prob. & Prop., May/June 2008, at 58.

This article begins by listing reasons why beneficiaries might want to change the trustee, governing law, or situs of a trust and the potential roadblocks.  Next, it discusses which state's law governs various issues affecting trusts, describes how the relocation of a trust might be accomplished, and focuses on particular issues that might cause beneficiaries to explore moving a trust.  Finally, it alerts attorneys to some federal transfer-tax pitfalls.

Social Responsible Investing -- Should Beneficiaries Suffer for "the Greater Good"?

Joel Dobris (Professor of Law, UC Davis School of Law) has recently published his article entitled SRI--Shibboleth or Canard (Socially Responsible Investing, That Is), Real Prop., Prob. & Tr. J. 755 (2008).  [Note:  ABA membership needed to access article via the link.]

Here is the editors' synopsis of his article:

This Article takes a look at the new and increasingly popular phenomenon of socially responsible investing. A topic that has garnered a lot of attention recently, the Article focuses on the intersection of socially responsible investing and trust law. The author’s research includes an eclectic array of interesting and socially relevant sources that culminates in a stimulating analysis of how this new philosophy of investing is likely to affect traditional notions of fiduciary duties in trust investing.

Estate Tax Exemption Portability -- A Good Idea?

Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled Portability of Exemptions.

Here is the abstract of her article:

Portability of estate tax exemptions has been called the best estate tax planning idea for a surviving spouse since the unlimited marital deduction in 1981. This article explains portability, including the recent Senate testimony urging its adoption.

The Life Insurance Industry--Elder Abuse Interface

Johnny Parker (Professor of Law, University of Tulsa College of Law) has recently published his article entitled Company Liability for a Life Insurance Agent's Financial Abuse of an Elderly Client, 2007 Mich. St. L. Rev. 683 (2007).

Here is an excerpt from the introduction of his article:

The purpose of this Article is to examine the life insurance industry's role in financial elder abuse. Part I explains why elders are perfect fraud victims for life insurance companies and agents. It examines the intrinsic and extrinsic considerations that make elderly people the perfect prey for predators, such as rogue life insurance agents. Part II explores the extent to which insurance agents engage in financial elder abuse. While financial elder abuse is frequently attributed to a minority of unscrupulous insurance agents, Part II demonstrates that the problem is more widespread than the life insurance industry is prepared to acknowledge. Part III describes the story of one life insurance agent's financial elder abuse case that occurred in Oklahoma and culminated in litigation in 2005. While the story is typical in many respects, it was chosen primarily because of the agent's response when the scam was finally detected. Part III demonstrates that elders who are financially victimized by their insurance agents rarely, if ever, received full financial compensation. Consequently, Part III serves as the launch pad for the primary thesis: making out a case of company liability for a life insurance agent's financial elder abuse. Part IV explores the traditional legal theories typically used to impute liability to employers for torts committed by employees. This Part explains each theory in detail with emphasis on its appropriateness in the context of financial elder abuse.

Does Latin America Need Trusts?

Dante Figueroa (Adjunct Professor, American University Washington College of Law) has recently published his article entitled Civil Trusts in Latin America: Is the Lack of Trusts an Impediment for Expanding Business in Latin America ?, 24 Ariz. J. Int'l & Comp. L. 701 (2007).

Here is the conclusion of his article:

This article has identified the main similarities and differences between the Anglo-American trust and the Latin American fideicomiso. Special attention was given to the core differences between both institutions in assessing the possibility of creating a truly useful Latin American fideicomiso. For this purpose, the article reviewed existing fideicomiso legislation in Latin America and advanced general criteria for future proposals in this area.

The ground is fertile for changes that will bring more business opportunities for everybody in the region. Domestic and foreign investors, claim and expect more creative and innovative legal tools to welcome more investment in the region. A new modern version of a Latin American trust goes to the heart of these expectations. A growing number of stakeholders think there are convincing reasons to believe trusts would bring many benefits to common law countries such as preferential tax treatments, the avoidance of probate procedures, and the isolation of assets from third parties. The Latin American region can not avail itself of these types of benefits unless a more modern form of trusts is implemented, either on an international context or within an internal country context.

A solution on the international level for the international recognition of trusts in the Anglo-American and Latin American legal systems is still a strong alternative. In the meantime, many would regard the unilateral design of a new modern Latin American trust as a beneficial first step. The analysis and proposals contained in this article seek to provide some guidance to that effect.

Top SSRN Downloads

Here are the top downloads from March 5, 2008 to May 4, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	367	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	104	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
3	103	Caregiving and the Case for Testamentary Freedom Joshua C. Tate, Southern Methodist University - Dedman School of Law, Date posted to database: March 25, 2008 Last Revised: April 29, 2008
4	96	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
5	76	Rector and Gore: Two Recent Flp Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: March 4, 2008 Last Revised: May 2, 2008
6	55	Serve the Cheerleader - Serve the World: Representation in Estate and Trust Proceedings and under the Uniform Trust Code and other Modern Trust Codes Martin D. Begleiter, Drake University Law School, Date posted to database: January 9, 2008 Last Revised: January 9, 2008
7	44	Text and Time: A Theory of Testamentary Obsolescence Adam J. Hirsch, Florida State University College of Law, Date posted to database: April 9, 2008 Last Revised: April 11, 2008
8	41	General Principles of Intestate Succession Under Hindu Law Tarun Jain, London School of Economics & Political Science (LSE), Date posted to database: January 30, 2008 Last Revised: May 3, 2008
9	41	More is Not Always Better than Less: An Exploration in Property Law Daphna Lewinsohn-Zamir, Hebrew University - Faculty of Law, Date posted to database: March 4, 2008 Last Revised: March 12, 2008
10	38	Disclaimers and Defined Value Clauses: Christiansen Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: April 8, 2008 Last Revised: April 30, 2008

Medicaid and LTC Coverage

Gene Coffey (staff attorney at the National Senior Citizens Law Center in Washington, D.C.) has recently published his article entitled Narrowing Medicaid's LTC Coverage? The Implications of the DRA's Home and Community-based Care Benefit, 9 Marq. Elder's Advisor 131-153 (2007).

Here is an excerpt from this article:

The purpose of this article is to examine the new HCBS option and its potential to narrow NF care entitlement, to consider the new option in the context of state efforts to modify clinical eligibility standards, and to identify how far states may go in making standards more stringent. Ultimately, it is entirely up to states to decide whether they will use the new option to expand or contract coverage. Fortunately, the first state to implement the HCBS option has chosen to use it to expand coverage. Still, because of recent efforts by other states to reduce enrollment by narrowing the NF clinical standard, and because of pressure states may feel to identify ways to reduce their LTC obligations, do not lightly dismiss the possibility that a state may attempt to restrict coverage by using the HCBS option. It is therefore important to identify the limitations of the states' ability to do so.

Should Trusts Remain Off the Public Record?

Frances H. Foster (Edward T. Foote II Professor of Law, Washington University School of Law) continues her study of trust privacy with the recent publication of her article entitled Trust Privacy, 93 Cornell L. Rev. 555 (2008).

Here is an excerpt from her article:

This Article reconsiders the very notion of trust privacy. It does so through a humanistic approach that essentially looks beyond abstractions to consider the actual effect of laws on people. Part I sets out the conventional rationale for treating wills as public record but allowing will-like revocable trusts to remain private. The remainder of the Article addresses the basic question reformers have failed to discuss: Should trusts be private? It sets out possible arguments for and against trust privacy. Parts II and III show that although privacy confers important human benefits, it also imposes significant human costs that reformers have largely ignored. In presenting the human impact of trust privacy, the Article hopes to inspire a more nuanced and balanced approach to reform. Part IV attempts to begin that process by considering four possible future directions for reform and their responses to the human costs of trust privacy.

The Probate Process -- Good or Bad?

Is probate an evil to be avoided at all costs, a quick and easy transfer mechanism with built-in protections, or something in-between?  The answer depends on a variety of factors, primarily the law of the state which will govern the estate.

For an interesting discussion, see Steven Seidenberg, Plotting Against Probate, ABA J., May 2008.  Here is an excerpt from this article:

More than ever before, clients want to do whatever they can to avoid the possibility that their estates will be probated, says Christopher Gagic, an estate planning attorney at Buckingham, Doolittle & Burroughs in Boca Raton, Fla. “I see clients insisting on a revocable living trust just because they want to avoid probate,” he says. “They all want to avoid probate, which seems to be a dirty word.”

Many state legislatures, too, seem to take a dim view of probate. They have enacted laws that authorize new techniques for avoiding probate, make more estates exempt from probate and streamline the probate process.

But the efforts of attorneys, clients and legislatures to limit probate may not always produce the desired results. The volume of trust and estate litigation is growing rapidly, with no end in sight. Moreover, avoiding probate means there is less outside supervision of asset transfers, making it easier for fraudulent schemes or family disputes to keep assets away from beneficiaries and creditors who are entitled to them.

“Avoiding probate is a legitimate goal, but people don’t know about the risks,” says Brian D. Bixby, who chairs the probate and trust litigation group at Burns & Levinson in Boston. “They don’t think [problems] can happen in their family, and they are often embarrassed when it happens to them.”

Split-Dollar Life Insurance

Joshua E. Husbands (Partner, Holland & Knight, Portland, Oregon) and J. Alan Jensen (Partner, Holland & Knight, Portland, Oregon) have recently published their article entitled Split-dollar Life Insurance Funding: You Mean People Still Do That?, Prob. & Prop., May/June 2008, at 40.

Here is an excerpt from their article:

After several torturous years of notices, reflection, meetings, and debate, the IRS issued final regulations for the taxation of split-dollar financed life insurance effective for agreements entered into after September 17, 2003. * * *

Despite the gloom and doom forecasted by many in the insurance industry and the legal profession, the final regulations did not sound the death knell for split-dollar planning.  Granted, some of the luster was gone from the heady days of collateral equity split-dollar arrangements using economic benefit measured by artificially low terms rates that had never actually seen the light of day in connection with the actual issuance of a real life insurance policy.  Nonetheless, in many instances the use of split-dollar arrangements still makes great sense and ca provide a very nice tax result for clients. * * *

This article analyzes the issues that should be raised with both older arrangements and those being put in place currently.

The Estate Planning--Art Interface

Lance S. Hall (ASA, cofounder and President of FMV Opinions) has recently authored a article entitled The New Frontier: Non-Charitable Estate Planning Transfers with Fractional Interests in Art (and Other Personal Property).

Here is the conclusion of his article:

With the art market reaching new highs and investor interest in art exceeding previous norms, increased scrutiny to the estate planning needs of art collectors and investors is required.  With the changes in the rules for charitable gifting under the 2006 Pension Protection Act, charitable gifts of art are no longer as attractive.  Alternatively, fractional interest gifting to the junior generation may result in significant estate tax reduction.  Even if a gift is not made, art investors/collectors in community property states may be able to avail themselves of undivided interest discounts at death.

Clearly, undivided interest discounts for art and other personal property are likely to incur close scrutiny and outright rejection by the IRS. However, under the principles of "fair market value" an undivided interest discount is applicable. The challenge will be convincing the court that an analysis with no empirical data involving actual undivided interest sales in art will meet the taxpayer's burden of proof. The courts have overcome identical difficulties associated with the lack of empirical data when discounting undivided interests in real estate. The issues are no different with art, collectibles and other personal property. An objective measure of the hierarchy of discounts applicable to different asset classes is to examine the relative volatility of the individual art or personal property with other classes of investments where empirical data is available (real estate is generally less volatile than stock and art, stock is generally less volatile than art, art is generally less volatile than gold and commodities). Then, the specific attributes of the art (or other personal property) could be used to more subjectively adjust the discount up or down, accordingly.

To focus the court's attention to the lack of control and lack of marketability of the interest, and away from the right to partition, a transfer made subject to an agreement to waive the right to partition is advisable.

With the charitable gifting no longer as advantageous, the estate planning professional can expect to see a significant rise in fractional interest discount planning for art (and other personal property).

Intestate Succession Under Hindu Law

Taru Jain (Advocate, Supreme Court of India) has recently posed an article on SSRN entitled General Principles of Intestate Succession Under Hindu Law.

Here is the abstract of this article:

Succession implies the act of succeeding or following, as of events, objects, places in a series. In the eyes of law however, it holds a different and particular meaning. It implies the transmission or passing of rights from one to another. In every system of law provision has to be made for a readjustment of things or goods on the death of the human beings who owned and enjoyed them.

In the present paper I discuss and analyze the rules of inheritance that the Hindu Succession Act, 1956 prescribes for matters of succession when an individual (a Hindu male or female) dies without prescribing for how his/her property shall devolve upon his/her death i.e. rules of intestate succession.

Top SSRN Downloads

Here are the top downloads from February 26, 2008 to April 26, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

1	347	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	151	Empty Promises: Settlor's Intent, the Uniform Trust Code, and the Future of Trust Investment Law Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: February 6, 2008 Last Revised: March 17, 2008
3	95	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
4	86	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
5	81	Caregiving and the Case for Testamentary Freedom Joshua C. Tate, Southern Methodist University - Dedman School of Law, Date posted to database: March 25, 2008 Last Revised: April 25, 2008
6	75	Rector and Gore: Two Recent Flp Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: March 4, 2008 Last Revised: March 4, 2008
7	50	Serve the Cheerleader - Serve the World: Representation in Estate and Trust Proceedings and under the Uniform Trust Code and other Modern Trust Codes Martin D. Begleiter, Drake University Law School, Date posted to database: January 9, 2008 Last Revised: January 9, 2008
8	41	Text and Time: A Theory of Testamentary Obsolescence Adam J. Hirsch, Florida State University College of Law, Date posted to database: April 9, 2008 Last Revised: April 11, 2008
9	40	More is Not Always Better than Less: An Exploration in Property Law Daphna Lewinsohn-Zamir, Hebrew University - Faculty of Law, Date posted to database: March 4, 2008 Last Revised: March 12, 2008
10	37	Disclaimers and Defined Value Clauses: Christiansen Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: April 8, 2008 Last Revised: April 8, 2008

Charitable Trusts -- India, U.K., and U.S. Compared

Taru Jain (Advocate, Supreme Court of India0 has recently posed an article on SSRN entitled Charitable Trusts: A Comparative Study of India, United Kingdom and the United States.

Here is an abstract of the article:

Trusts are an important institution to be studied in law for various reasons. Both jurisprudentially as well as from a perspective of taxation, trusts affect the making of rules. From a practical perspective, trusts are also an essential attribute for people to make things work and charitable trusts are one such type of trust, which have become increasingly common in todays world.

This paper seeks to examine the position and legal standpoint of a charitable trust across India, United Kingdom and United States.

The "Uncleing Principle" and Intestate Succession

Gary Spitko (Professor of Law, Santa Clara University School of Law) has recently posted on SSRN his article entitled Open Adoption, Inheritance, and the  Uncleing Principle.

Here is the abstract of his article:

This article critiques current inheritance law relating to adopted children in light of the purposes of modern adoption law and the increasing prevalence of open adoptions.  The article proposes an uncleing principle to determine intestate inheritance rights in cases of open adoption in which a birth parent has maintained a qualifying functional relationship with the adopted-out child subsequent to the adoption.  When applicable, the uncleing principle would treat the adopted-out child and her birth parent as potential heirs of one another.  Unlike the presently dominant  all-or-nothing  approach to inheritance rights arising from adoption, however, the proposal would not under any circumstances treat the birth parent as a legal parent of the adopted-out child for purposes of inheritance.  Rather, the uncleing principle would treat the birth parent as an uncle or aunt to the adopted-out child, and would similarly increase the distance on the family tree between the adopted-out child and members of her birth family by one line of inheritance and two degrees of kinship.  When applicable, the uncleing principle would better serve the interests of the adopted child, her adoptive family, and her birth family than does the all-or-nothing approach, under which the adopted-out child is either a child of her birth parents for purposes of inheritance or is a stranger to her birth parents for purposes of inheritance.  The uncleing principle affirms the parental role of the adoptive parents by refusing to treat a birth parent as a legal parent.  Simultaneously, the uncleing principle recognizes and validates the importance of the bond between the adopted child and her birth family when the birth parent has maintained a sufficient functional relationship with the adopted child subsequent to the adoption.

Reverse Mortgages -- The Good, Bad, and Ugly

In Cashing in on home sweet home, 96 Ill. B.J. 179 (2008), Helen W. Gunnarsson explains that reverse mortgages are a popular, but controversial, way for elderly clients to use the equity in their homes.  Her article discusses how they work and why people should be wary.

Here is an excerpt from the article:

Simply put, says [Elizabeth W.] Anderson, a reverse mortgage is "a way of getting cash from the equity in a home." The lender pays the borrower/homeowner money, either as a lump sum, a monthly payment, a line of credit, or a combination of those methods, Anderson says. "The home remains titled in the name of the owners and the responsibility of maintaining the property, paying home-owner's insurance and property taxes continues to lie with the owners."

Instead of making monthly repayments of the loan, the amount of the homeowner's debt actually increases over the loan term. So, says Anderson, "If the loan is carried for a long period of time, there may not be any equity left in the house. This is also true if the home's value decreases. However, a lender may not recover any more than the value of the home upon repayment. Therefore, the homeowner will never owe more than what the home is worth."

All reverse mortgages involve fees, Anderson notes. Those fees are added to the loan balance and accrue interest over the period of the loan. Naturally, those fees, plus interest on them, must be repaid when the loan is repaid. Additionally, fees as well as interest rates and closing costs may impact the loan amount, Anderson cautions. * * *

Anderson cautions that clients should consider carefully whether a reverse mortgage makes financial sense for them. "[I]t can be a very expensive way to make purchases or investments, particularly when other options are available," she notes. Additionally, taking out a reverse mortgage may mean leaving little or nothing to heirs, she points out. * * *

Anderson warns of third parties who may financially exploit elderly people by persuading them to take out reverse mortgages to buy other goods and services.

Probate Litigation and Family Relations

Karen S. Gerstner, (Attorney at Law, Karen S. Gerstner & Associates, P.C.) has recently published her article entitled A Message to Clients . . . Avoiding Probate Court Litigation, Prob. & Prop., March/April 2008, at 56.

Here is an excerpt from her article:

When I was a young lawyer, I attended a meeting with several attorneys to discuss certain “contested matters” that had arisen after the death of a widower who died survived by four children. I was shocked to hear one of the seasoned attorneys say, “If all decedents had only one child, my workload would decrease to nothing.” Whether you go back to Cain and Abel, or only as far back as the Smothers Brothers (“Mom always liked you best”), sibling rivalry is the chief factor in many disputes arising after a parent dies. Many laypeople attribute all litigation to greed, but in the case of family situations, often much more is involved than simply greed. Sometimes children hold deep-seated resentments, which may be based on perceived unfair treatment by a parent or sibling, often going back many years. Sometimes the last living parent is the only “glue” holding the children in the family “together” (if they ever truly were, in fact, “together”). Sometimes parents have unrealistic expectations about family.

Should state law update "old" wills on the basis of presumed intent?

Adam Hirsch (William and Catherine VanDercreek Professor of Law, Florida State University) has recently posted on SSRN his article entitled Text and Time: A Theory of Testamentary Obsolescence (forthcoming in the Washington University Law Review).

Here is the abstract of his article:

Events may occur after a will is executed that ordinarily give rise to changes of intent regarding the estate plan - yet the testator may take no action to revoke or amend the original will. Should such a will be given literal effect? When, if ever, should lawmakers intervene to update a will on the testator's behalf?

This is the problem of testamentary obsolescence. It reflects a fundamental, structural problem in law that can also crop up with regard to statutes, contracts, and other performative texts, any one of which may become timeworn. This article develops a theoretical framework for determining when lawmakers should - and should not - step in to revise wills that testators have left unaltered, and to locate this framework in the context of other forms of textual obsolescence. The article focuses on a variable I call friction - i.e., the extent of difficulty text makers face in revising texts on their own. Some changed circumstances display the interesting quality of altering testamentary intent while simultaneously disabling the testator from executing a new estate plan. In such instances, legal intervention to effectuate intent is warranted. Where the testator remains in a position to amend a will following a change of circumstance, the case for legal intervention becomes uneasy. Nevertheless, lesser forms of friction may continue to operate, affording testators less practical opportunity to redo their wills, and hence again giving cause for interpreting wills dynamically.

When lawmakers do act to update a will, they should ordinarily do so on the basis of the testator's probable intent. Yet, I also argue that in some instances lawmakers do better to follow the testator's probable assumptions about what rule governs will interpretation, even if that rule fails to match most testators' preferences. I call this an error-minimizing default. In the Appendix, I show that under some conditions an error-minimizing default is more efficient than a majoritarian default, a contribution to default rule theory.

Taking Religion into Account in Estate Planning

Martin M. Shenkman, (Attorney at Law, Martin M. Shenkman, P.C.) has recently published his article entitled Integrating Religious Considerations into Estate and Real Estate Planning, Prob. & Prop., March/April 2008, at 34.

Here is an excerpt from his article:

Contemplating the myriad religious, philosophical, and related issues in your law practice provides amazing touchstones to better understand and appreciate your own heritage, culture, and religious feelings and affiliation. The intellectual and personal rewards are substantial. As you seek out and address a client’s religious and other personal wishes, you will likely create a bond with the client that will take the relationship beyond that of a mere scrivener to that of a true family and business adviser. The rewards of providing that level of personal service, and the strengthened client bonds, will enhance your practice, client retention, and more. It’s good business.

Top SSRN Downloads

Here are the top downloads from February 19, 2008 to April 19, 2008 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	325	Deduction Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations David Yermack, New York University - Stern School of Business, Date posted to database: February 24, 2008 Last Revised: March 29, 2008
2	252	Back to School: The New Parameters of Funding a Grandchild's College Education Richard L. Kaplan, University of Illinois College of Law, Date posted to database: February 13, 2008 Last Revised: April 14, 2008
3	144	Empty Promises: Settlor's Intent, the Uniform Trust Code, and the Future of Trust Investment Law Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: February 6, 2008 Last Revised: March 17, 2008
4	88	Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds Robert H. Sitkoff, Max M. Schanzenbach, Harvard Law School, Northwestern University - School of Law, Date posted to database: April 2, 2008 Last Revised: April 2, 2008
5	80	The [Fiduciary] Duty of Fidelity Robert Flannigan, University of Saskatchewan, Date posted to database: March 14, 2008 Last Revised: March 14, 2008
6	75	Caregiving and the Case for Testamentary Freedom Joshua C. Tate, Southern Methodist University - Dedman School of Law, Date posted to database: March 25, 2008 Last Revised: April 11, 2008
7	74	Spiritualism and Will(s) in the Age of Contract Christopher J. Buccafusco, University of Chicago - Law School, Date posted to database: February 25, 2008 Last Revised: February 25, 2008
8	73	Rector and Gore: Two Recent Flp Cases Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: March 4, 2008 Last Revised: March 4, 2008
9	68	Bigelow: The Ninth Circuit on FLPs Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: December 17, 2007 Last Revised: December 17, 2007
10	58	How Do I Love Thee, Let Me Count the Days: Deathbed Marriages in America Terry L. Turnipseed, Syracuse University College of Law, Date posted to database: January 29, 2008 Last Revised: January 29, 2008

Passive Loss Rules and Their Effect on Trust Planning

Martin M. Shenkman, (Attorney at Law, Martin M. Shenkman, P.C.) has recently published his article entitled Trusts and Passive Loss Rules, Prob. & Prop., March/April 2008, at 8.

Here is the conclusion to his article:

The material participation test and the application of the passive loss rules can have substantial effect on trust planning, real estate structures, and estate planning. The law remains uncertain, and the limited authorities seem to imply a conceptually flawed framework that will likely lead to fact-specific cases that will not provide simplicity or bright-line tests. In the end, to be consistent with the purposes for which the passive loss rules were enacted, the approach to resolving this issue should consider the activ