Wills, Trusts & Estates Prof Blog

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

Sunday, September 23, 2018

Article on Arbitration Contracts Between Trustees and Their Investment Agents: a Warning Label

TrusteesCharles E. Rounds, Jr. recently published an Article entitled, Arbitration Contracts Between Trustees and Their Investment Agents: a Warning Label, 93 N.D. L. Rev. 263-275 (2018). Provided below is an abstract for the Article.

This Article considers whether arbitration clauses in contracts between trustees and their investment managers are binding on the trust beneficiares.Nowadays, it is default law that a trustee may delegate investment discretion to an investment manager (IM); provided the IM has been prudently selected by the trustee and the IM’s activities are prudently monitored on an ongoing basis by the trustee. The core relationship is one of agency, the trustee being the principal and the IM being the agent. The two, as well, are in a contractual relationship incident to the agency. The IM, however, also owes fiduciary duties that run directly to the trust beneficiaries, though the beneficiaries are parties neither to the agency nor the contract. These duties are imposed separately by equity. Assume the beneficiaries bring an action directly against the IM for breaching one or more of his or her equitable duties to them. Should the trust beneficiaries be bound at law by the arbitration clause in the contract between the trustee and the IM? The Article concludes that they should not be; but if they are then the trustee could well have been in breach of his or her equitable duty of undivided loyalty to the beneficiaries by having acquiesced to the clause’s insertion in the first place. And as to the IM, he or she, under general equitable principles, may well have a fiduciary duty to the beneficiaries to waive his or her rights at law to have the dispute arbitrated, at least to the extent that it is in the interests of the beneficiaries that he or she does so.

September 23, 2018 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Saturday, September 22, 2018

CLE on Estate Planning for Farmers and Ranchers

CLEThe National Business Institute is holding a conference entitled, Estate Planning for Farmers and Ranchers, on Wednesday, November 14, 2018, at the Hilton Garden Inn North Little Rock in North Little Rock, Arkansas. Provided below is a description of the event:

Program Description

How to Protect Farm Assets and Transfer Them to Heirs

Estate planning for farms and ranches requires specialized knowledge and tools to ensure the best client representation. This legal course will give you the knowledge to preserve the farms and other assets your clients have worked their entire lives to acquire and build. Explore the challenges and opportunities unique to estate planning for farmers to help make good sense of difficult legal and financial policies. Learn what you need to know about estate taxes, wills, trusts, government programs, and other key elements. Help your clients take care of their estate planning needs and their family's future - register today!

  • Take full advantage of government farm programs and valuation discounts.
  • Explore the deciding factors in choosing the right business entity when planning ownership transfer.
  • Analyze the liquidity of farm assets and augment each plan accordingly.
  • Employ all available tools for transferring assets and preserving wealth.
  • Tackle harvest yield predictions and other unique factors of farm asset valuation.
  • Recognize when giving away the farm is the wisest financial decision and how to do it properly.

Who Should Attend

This basic-to-intermediate level seminar is designed for:

  • Attorneys
  • Estate and Financial Planners
  • Accountants and CPAs
  • Tax Preparers
  • Trust Officers
  • Paralegals

Course Content

  1. Business Structure Choice and Conversion - Including Sample Documents
  2. Income and Gift Tax Planning
  3. Medicaid (Long-Term) Planning for Farmers and Ranchers
  4. Planning for a Full or Partial Outright Sale or Gift
  5. Agricultural Use Valuation
  6. Planning for a Gradual Transfer Within the Family
  7. Transfers Upon Death: Key Estate Administration Concerns

Continuing Education Credit

Continuing Legal Education – CLE: 6.00

Financial Planners – Financial Planners: 7.00

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 7.00 *

* denotes specialty credits

September 22, 2018 in Conferences & CLE, Disability Planning - Property Management, Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 18, 2018

Judge Rules Hawaiian Princess Unfit to Manage $215m Trust

Hawaii-county-mapThe last "princess" Hawaii, a descendant of the Hawaiian royal family that was overthrown in 1893, has been found to not possess sufficient capacity to manage her $215 million trust. Abigail Kawānanakoa, 92, is also the great-granddaughter of James Campbell, a sugar plantation owner that was one of Hawaii's largest landowners, and whom Kawānanakoa inherited much of her fortune from.

Kawānanakoa was known locally to be quiet and private, but also would lend a hand to many in need by paying people's bills and mortgages. In 2001, the heiress also established a $100m trust aimed at supporting Native Hawaiian language, culture, art, education, health and housing. “At the moment, she is a benefactor for the Hawaiian people,” said Lilikalā Kame’eleihiwa, director and professor at the University of Hawaii’s Center for Hawaiian Studies and a board member for Kawānanakoa’s trust.

But Kawānanakoa had a stroke last year and allegedly began to act "out of character." She married her girlfriend of over two decades, Veronica Gail Worth, and fired her attorney, Jim Wright after he claimed she was no longer able to serve as a trustee. Kawānanakoa hired new representative, Michael Lilly, and told a judge in Honolulu that she desired to remove Wright and appoint new trustees, including her wife.

The judge on Monday removed Wright as trustee, but appointed First Hawaiian Bank in his place. He said that he believed Kawānanakoa was able to decide that she wanted a trustee replaced, but that it was more complicated to appoint someone new, and that he didn’t find her capable of managing her financial assets.

See Breena Kerr, Judge Rules Hawaiian Princess Unfit to Manage $215m Trust, The Guardian, September 15, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

September 18, 2018 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (1)

Monday, September 17, 2018

CLE on Using Trusts and LLC Together in Estate Planning

CLEThe National Business Institute is holding a live video webcast entitled, Using Trusts and LLC Together in Estate Planning, on Tuesday, October 30, 2018, at 9:00 a.m. - 4:00 p.m. Central. Provided below is a description of the event:

Program Description

Enhancing Your Estate Plans by Combining Top Techniques

Make the best use of the two most effective and versatile estate planning instruments: trusts and LLCs. This practical legal guide will help you determine the best course of action for each client's unique situation, and implement your plan impeccably. Register today!

  • Stay up to date on the tax rules governing the participation of trusts in a business.
  • Ensure the transfer of an LLC into a trust goes off without a hitch.
  • Get the best prevention and resolution techniques for disputes most likely to arise.

Who Should Attend

This legal guide is designed for attorneys. It will also benefit accountants, estate planners, trust officers, business owners, and paralegals.

Course Content

  1. Material Participation by Trusts: Complying with the Tax Rules
  2. Using Asset Protection Trusts and LLCs Together
  3. The Intentionally Defective Grantor Trusts (IDGTs) and LLCs
  4. Transferring an LLC to a Trust (with Sample Documents)
  5. Trustees and Other LLC Members: Duties, Powers, and Decision-Making
  6. What to Do When the Trust Terms Conflict with the Interests of the LLC Members
  7. Transfers and Dissolution Issues
  8. Legal Ethics

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 6.00 -  AK*
CLE 6.00 -  AL*
CLE 6.00 -  AR*
CLE 6.00 -  AZ*
CLE 6.00 -  CA*
CLE 7.00 -  CO*
CLE 6.00 -  CT*
CLE 6.00 -  DE*
CLE 7.00 -  FL*
CLE 6.00 -  GA*
CLE 6.00 -  HI*
CLE 6.00 -  IA*
CLE 6.00 -  ID*
CLE 6.00 -  IL*
CLE 6.00 -  IN*
CLE 7.00 -  KS*
CLE 6.00 -  KY*
CLE 6.00 -  LA*
CLE 6.00 -  ME*
CLE 6.00 -  MN*
CLE 7.20 -  MO*
CLE 6.00 -  MP
CLE 6.00 -  MS*
CLE 6.00 -  MT*
CLE 6.00 -  NC*
CLE 6.00 -  ND*
CLE 6.00 -  NE*
CLE 6.00 -  NH*
CLE 7.20 -  NJ*
CLE 6.00 -  NM*
CLE 6.00 -  NV*
CLE 7.00 -  NY*
CLE 6.00 -  OH*
CLE 7.00 -  OK*
CLE 6.00 -  OR*
CLE 6.00 -  PA*
CLE 7.00 -  RI*
CLE 6.00 -  SC*
CLE 6.00 -  TN*
CLE 6.00 -  TX*
CLE 6.00 -  UT*
CLE 6.00 -  VA*
CLE 6.00 -  VT*
CLE 6.00 -  WA*
CLE 7.00 -  WI*
CLE 7.20 -  WV*
CLE 6.00 -  WY*

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 7.00 -  AZ
CPE for Accountants 7.00 -  NY*
CPE for Accountants 7.00 -  WA
CPE for Accountants 7.00 -  WI

 * denotes specialty credits

September 17, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Tuesday, September 11, 2018

Article on The Law and Economics of Environmental, Social, and Governance Investing by a Fiduciary

TrusteesMax M. Schanzenbach & Robert H. Sitkoff recently published an Article entitled, The Law and Economics of Environmental, Social, and Governance Investing by a Fiduciary, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article.

The use of environmental, social, and governance (ESG) factors in investing is increasingly common and widely encouraged by investment professionals and non-government organizations. However, trustees and other fiduciary investors in the United States, who manage trillions of dollars, have raised concerns that using ESG factors violates the fiduciary duty of loyalty. Under the “sole interest rule” of trust fiduciary law, a trustee or other investment fiduciary must consider only the interests of the beneficiary. Accordingly, a fiduciary’s use of ESG factors, if motivated by the fiduciary’s own sense of ethics or to obtain collateral benefits for third parties, violates the duty of loyalty. On the other hand, some academics and investment professionals have argued that ESG investing can provide superior risk-adjusted returns. On this basis, some have even argued that ESG investing is required by the fiduciary duty of care. Against this backdrop of uncertainty, this paper examines the law and economics of ESG investing by a fiduciary. We differentiate “collateral benefits” ESG from “risk-return” ESG, and we provide a balanced assessment of the theory and evidence from financial economics about the possibility of persistent, enhanced returns from risk-return ESG.

We show that ESG investing is permissible under trust fiduciary law only if two conditions are satisfied: (1) the fiduciary believes in good faith that ESG investing will benefit the beneficiary directly by improving risk-adjusted return, and (2) the fiduciary’s exclusive motive for ESG investing is to obtain this direct benefit. We reject the claim that the law imposes any specific investment strategy on fiduciary investors, ESG or otherwise. We also consider how the law should assess ESG investing by a fiduciary if authorized by the terms of a trust or a beneficiary or if it would be consistent with a charity’s purpose, clarifying such cases by asking whether a distribution would have been permissible under similar circumstances.

September 11, 2018 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Monday, September 10, 2018

Top 10 Estate Planning Mistakes We See and How to Avoid Them

Top10The authors decided to explain 10 estate planning mistakes instead of focusing on one. Explaining each mistake facially rather than diving in depth may make it easier for many to distinguish the errors they are making in their own estate plans.

  • Joint Accounts.
    • The presumption of a joint account is that the funds will belong to the other owner once the first owner passes away, which may have not been their intent. A power of attorney registered for the account is a more viable option.
  • I Love You Wills.
    • Though the gift and estate exemption is portable, the generation skipping transfer (GST) tax is not, and the spouse that inherits all of the deceased's assets may not be able to transfer assets tax free to the next generation.
  • Receiving an Inheritance Outright.
    • Inheriting through a trust may be able to solve a slew of issues, from benefit qualifications to creditors.
  • Failing to Update Beneficiary Designations.
    • For assets that do not pass through a will or trust, updating beneficiary designations are a must. Change occur in a lifetime, and the designations have the ability to reflect that.
  • Naming an Estate as Beneficiary of an IRA or Qualified Retirement Plan Benefit.
    • A preference is to generally afford clients this flexibility by naming a revocable trust as beneficiary instead.
  • Failing to Title Out of State Real Estate to a Revocable Trust.
    • An ancillary probate can be avoided in the other state if the real estate is owned by a client’s revocable trust, rather than in the client’s name.
  • Not Considering a Roth IRA Conversion.
    • If an individual does not plan to use all of the funds in their IRA, converting to a Roth IRA can be beneficial to pass on to heirs and compound their funds tax-free.
  • Delaying Large Charitable Gifts Until Death.
    • It is usually better for clients to make significant gifts to charity during their lifetimes rather than wait until their deaths.
  • Gifting Highly Appreciated Assets During Lifetime.
    • This can avoid the step-up basis for capital gains for heirs or beneficiaries.
  • Failure to Create an Estate Plan.
    • This is the number one mistake, and truly everybody needs an estate plan.

See Rebecca Rosenberger Smolen and Amy Neifeld Shkedy, Top 10 Estate Planning Mistakes We See and How to Avoid Them, The Legal Intelligencer, September 4, 2018.

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

September 10, 2018 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Trusts, Wills | Permalink | Comments (0)

How Three Families are Using the New $11 Million Estate and Gift Tax Break

Tax actThe Tax Cuts and Jobs Act (TCJA) doubled the gift and estate tax exemption, giving those that needed it another $11 million to transfer tax free to the next generation or beyond. There are several different scenarios that can be benefited by the increase, as evidence by these examples:

  • For those that have yet to use any of their gift tax exemptions, it means they have the full $11 million (or $22 million or a married couple). But that doesn't necessarily mean that they have to use all of it.
  • Christen Douglas, an estate lawyer with McDermott Will & Emery in New York, created a new trust for them where an individual trustee (a family member) has discretion over trust payouts. “The new exemption is really making people revisit their estate plans and think about what they can improve upon."
  • IA widow is using the new exemption to transfer $11 million worth of commercial real estate via an installment sale into a dynasty trust for her five grandchildren and their offspring. The trust doesn’t include her two daughters as beneficiaries; they’re already well-taken care of.

See Ashlea Ebeling, How Three Families are Using the New $11 Million Estate and Gift Tax Break, Forbes, August 31, 2018.

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

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

September 10, 2018 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Trusts | Permalink | Comments (0)

Friday, September 7, 2018

CLE on IRA Distributions in Estate Planning: Trusts as Beneficiaries

CLEThe National Business Institute is holding a teleconference entitled, IRA Distributions in Estate Planning: Trusts as Beneficiaries, on Wednesday, September 26, 2018, at Central: 10:00 AM - 11:30 AM. Provided below is a description of the event:

Program Description

Make the Best Use of IRAs in Estate Planning

Help your clients maximize the benefit of IRAs with a practical guide to distributions to trusts. Get solutions to new and common problems and learn why and how to structure an IRA trust to comply with minimum distribution rules in the most tax-efficient manner. Register today!

  • Clarify required minimum distribution requirements and find the best ways to comply.
  • Determine whether conduit or accumulation trust is best for specific situations.
  • Find out how to resolve multiple beneficiary challenges with multiple trusts.

Who Should Attend

This legal guide is designed for attorneys. It will also benefit accountants, CPAs, trust officers, and paralegals looking to increase their knowledge of IRA rollover techniques.

Course Content

  • Clark v. Rameker Decision on Inherited IRAs and its Implications for Non-Bankruptcy Cases
  • Setting the Life Expectancy for Distributions From the Inherited IRA - Key Beneficiary Designation Considerations
  • Other IRA Rollover Rules and Tactics
  • Complying with IRA Required Minimum Distribution Rules
  • Choosing Between Distributions to Persons vs. Trusts
  • Qualifying a Trust as a Beneficiary
  • Fixing Problems Caused by Using a Generic Trust Not Specifically Designed for the IRA Stretch
  • Choosing Between a Conduit and an Accumulative IRA Trust: What Fits Your Client's Situation Better?
  • Using Separate Trusts for Multiple Beneficiaries
  • Recent IRA Guidance on Inherited IRAs

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 1.50 -  AK
CLE 1.50 -  AL
CLE 1.50 -  AR
CLE 1.50 -  AZ
CLE 1.50 -  CA*
CLE 2.00 -  CO
CLE 1.50 -  CT
CLE 1.50 -  DE
CLE 2.00 -  FL*
CLE 1.50 -  GA
CLE 1.50 -  HI
CLE 1.50 -  IA
CLE 1.50 -  ID
CLE 1.50 -  IL
CLE 1.50 -  IN
CLE 1.50 -  KS
CLE 1.50 -  KY
CLE 1.50 -  LA*
CLE 1.50 -  ME
CLE 1.50 -  MN
CLE 1.80 -  MO
CLE 1.50 -  MP
CLE 1.50 -  MS
CLE 1.50 -  MT
CLE 1.50 -  NC*
CLE 1.50 -  ND
CLE 1.50 -  NE
CLE 1.50 -  NH
CLE 1.80 -  NJ
CLE 1.50 -  NM
CLE 1.50 -  NV
CLE 1.50 -  NY*
CLE 1.50 -  OH
CLE 2.00 -  OK
CLE 1.50 -  OR
CLE 1.50 -  PA
CLE 1.50 -  RI
CLE 1.50 -  SC
CLE 1.50 -  TN
CLE 1.50 -  TX*
CLE 1.50 -  UT
CLE 1.50 -  VA
CLE 1.50 -  VT
CLE 1.50 -  WA
CLE 1.50 -  WI
CLE 1.80 -  WV
CLE 1.50 -  WY

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 1.50 -  AZ
CPE for Accountants 1.50 -  NY*
CPE for Accountants 1.50 -  WA
CPE for Accountants 1.00 -  WI

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 1.50 *

* denotes specialty credits

September 7, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, September 2, 2018

CLE on Advanced Estate Planning Practice Update: Fall 2018

CLEThe American Law Institute is holding a webcast / telephone seminar entitled, Advanced Estate Planning Practice Update: Fall 2018, on Tuesday, October 30, 2018, at 12:00 - 2:00 p.m. Eastern. Provided below is a description of the event:

Why You Should Attend

Join us in October to see why attorneys across the country tune in for this must-attend program three times a year!   This popular, advanced program covers significant recent developments and how they affect estate planning practice. Featuring a nationally renowned faculty of estate planning lawyers, as well as Professor Jeffrey N. Pennell, this webcast is designed for sophisticated practitioners who need to stay up-to-date on changes in the field!  

What You Will Learn

This unique program captures late-breaking important opinions and legislative and regulatory developments, as determined by the faculty at the time of the presentation. Precise topics will be posted here as we get closer to the presentation date.   In addition to superb teaching, a favorite feature of past registrants is the comprehensive outline that all registrants get ahead of the program. It provides summaries written by the faculty on every topic discussed during the program, in the order in which it is addressed!  

Who Should Attend

Experienced estate planning attorneys, trust administrators, and financial and tax professionals who provide guidance and strategies for transferring wealth and reducing estate taxes should attend this valuable webcast.  

September 2, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Friday, August 31, 2018

Fore! California Court Drives Away Claim that Trustee’s Attorney Breached Trust

GolfingChristina Cortese is the biological daughter of Francesca Naify and the stepdaughter of Robert Naify, and after the death of her mother Francesca, she inherited a "modest" amount. Under the advice of attorney Sherwood and the promise by her stepfather that she would inherit a 250-acre golf course, she terminated her mother's trust. Cortese was shocked when she was not a beneficiary of Robert Naify's estate.

She sued Sherwood in San Francisco County Superior Court, alleging breach of trust and claiming that Sherwood assisted Robert in effectuating a plan of “withholding community property from Francesca’s estate, devaluing Francesca’s estate, mismanaging her trust, and terminating it in a manner that benefited Robert.”

The appellate court looked at the factual allegations to determine whether she had alleged a conspiracy within the meaning of Civil Code section 1714.10. The court could not “conceive how Sherwood could have participated in Robert’s alleged breaches of fiduciary duty without an implied agreement to do so.” Because of the statutory requirements, she was required to seek a judge's permission to file the claim, and as she failed to do so the appellate court found her claim legally insufficient.

See Jeffrey S. Galvin, Fore! California Court Drives Away Claim that Trustee’s Attorney Breached Trust, Trust on Trial, August 27, 2018.

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

August 31, 2018 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Travel, Trusts | Permalink | Comments (0)