Monday, March 13, 2017
Marvin E. Blum recently published an Article entitled, Filling in the Gaps: Create a “Red File” for Clients to Cover Issues Beyond Traditional Estate Planning, Tr. & Est. 68 (Feb. 2017). Provided below is an abstract of the Article:
Most estate planners will agree that one of the most formidable obstacles to the planning process is the general reluctance of clients to discuss their own mortality. There’s one significant motivating factor, however, that drives clients to confront their mortality and plan for their incapacity and death: control. Clients want to ensure that on incapacity, they’re cared for as they wish and on death, their assets pass exactly how they would like. While crafting an estate plan, both planners and clients tend to focus on the effective and tax-efficient distribution of the client’s assets. It’s all too common for a client to walk away with a perfectly crafted portfolio of estate-planning documents that expertly disseminates the client’s property but fails to provide the control so desperately desired. How is it possible for a perfect plan to be so imperfect? The answer lies outside of the formal estate-planning documents and accordingly often goes overlooked by planners and clients alike, but the answer, itself, is simple. By adding a “red file” to the traditional batch of estate-planning documents, clients increase their level of control in two key areas: (1) incapacity, and (2) administration of the estate at death.
As part of the planning process, estate planners should encourage clients to create a red file and guide them on how to do it. Essentially, a red file is a notebook or other centralized source of information that will not only aid an executor in navigating the waters of estate administration, but also will make very clear the wishes of a client in the event he becomes incapacitated in the future.
While only clients can actually establish the red file, estate planners should provide their clients with a framework of guidelines for what it should contain. There’s no specific formula for what makes a red file effective, but clients should know that the more information they include, the more helpful it will be to those managing their assets or making care decisions on their behalf.
Wednesday, January 25, 2017
During Prince’s longstanding career, we saw him part with his record label, change his name, and yank his songs off popular streaming services all to prove a point—no one could tell him what to do. Although his desire to control his music inspired other artists, this limited exposure could hurt the value of the late singer’s music. Without a will, Prince’s wishes will take a backseat because his estate administrators are under a court mandate to get the most for his 1,000-song catalog. The estate administrators have a legal responsibility to maximize the return on his music, which most likely goes against his wishes, in order to pay the looming estate tax bill.
See Lucas Shaw, With No Will, Prince Loses the Control He Zealously Guarded, Wealth Management, January 18, 2017.
Saturday, January 21, 2017
In 2017, estate planners should look to take their own advice, just as they easily give necessary advice to their clients. First and foremost, it is essential that estate planners write a letter to their children detailing critical information needed for emergencies. Similarly, one should also give access to any passwords for their digital assets. Also, save your children and family the trouble of guessing your body disposition by making arrangements beforehand, such as buying a burial plot or arranging plans for cremation. Additionally, review life insurance terms and create any necessary trusts that will benefit loved ones. One can also provide for their grandchildren by setting up 529 plans that will provide for their education. Setting up an asset inventory will also make it easier for family members to be organized and informed. Further, one should continue to update charitable bequests as they see fit and revise any beneficiary designations to reflect their wishes. Lastly, estate planners should look to set up family meetings to provide those important to them with the information and security they will need to carry out their estates.
See Martin M. Shenkman, An Estate Planner’s 11 Tips for the New Year, Wealth Management, January 18, 2017.
Friday, January 13, 2017
Several unanswered questions still remain as to the management and distribution of Prince’s estate since his death in April 2016. Specifically, much is still unknown about the status of his valuable music catalog. Jay-Z’s companies, Tidal and Roc Nation, are in a legal battle with Bremer Trust, the administrator of Prince’s estate, over the late singer’s intellectual property, which includes a vault of unreleased music. Bremer Trust filed a copyright infringement suit, alleging that Tidal only had exclusive rights to stream Prince’s new music for ninety days but instead streamed all fifteen Prince albums. The defendant companies claim they had an oral and written agreement with Prince to exclusively stream his music, while Prince’s label NPG Records claims they terminated any agreement made before his death. Currently, representatives for the singer’s estate are nearing a deal to stream his music on Apple Music and Spotify. However, with Prince’s highly critical perspective of the music industry, it would come as no surprise that Prince struck a deal with Tidal because they have a reputation of being substantially more artist-friendly.
See Michael Feispor, Jay-Z’s Tidal, Roc Nation and Bremer Trust Battle over Prince’s Music, Forbes, January 11, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Thursday, January 5, 2017
Creating an estate plan is essential to assuring your legacy, but the process does not end when the plan is in place. You must periodically review your estate plan to assure it accurately reflects your current goals. An important time to revise your plan is when your personal or financial situation changes—more specifically, in the event of divorce, remarriage, birth or adoption of children, inheritance, or illness. It is also important to review your estate plan when tax laws change because they can often dramatically affect your plan. Life’s events show us that it is important to keep up with our estate plans to ensure that our assets will go to the proper place.
See Mark Eghrari, 6 Reasons to Revise Your Estate Plan as Soon as Possible, Forbes, January 2, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Thursday, December 15, 2016
INTERPRETATION: Testamentary scheme supports gift by implication. The decedent’s will made gifts of $2,000 to each of her eight children and two stepchildren, gave the largest amount that could pass free of federal estate tax to her nominated trustee in trust for her spouse for life, remainder to the 10 children and stepchildren and to the descendants of any who did not survive, and the residue to her spouse. The will made no provision if the spouse predeceased the decedent which happened. At the decedent’s death, the trust could not be funded because the decedent’s applicable exclusion amount had been consumed by lifetime gifts made by her agent, one of her eight children. Had the trust been funded, the remainders in the children, all of whom survived the decedent, would have accelerated. The failure of the residuary gift meant that the residue passed under the intestacy statute to the decedent’s eight children. One of the stepchildren began a proceeding to construe the will and prevailed in the Surrogate’s Court. On appeal, a New York intermediate appellate court affirmed, holding that the decedent’s general testamentary plan as evidenced in the will shows that the decedent intended to treat her children and stepchildren equally, does not show that the decedent intended a different result if her spouse predeceased, and therefore the general plan must be carried out by implying a will provision giving the residue of the estate equally to all ten children. In re Estate of Warren, 39 N.Y.S. 3d 282 (N.Y. App. Div. 2016).
Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.
Sunday, December 11, 2016
KAREN LECRAFT HENDERSON, Circuit Judge: This case presents the question of how to determine the citizenship of a trust for diversity subject-matter jurisdiction pursuant to 28 U.S.C. § 1332(a). In light of the United States Supreme Court’s recent decision in Americold Realty Trust v. ConAgra Foods, Inc., 577 U.S.__, 136 S. Ct. 1012 (2016), we conclude that a so-called “traditional trust” carries the citizenship of its trustees. We accordingly reverse the district court’s Rule 12(b)(1) dismissal and remand for further proceedings. Fed. R. Civ. P. 12(b)(1).
See Wang v. New Mighty U.S. Trust, No. 12–7038 (December 9, 2016).
Friday, December 2, 2016
Sarah Pursglove decided to take a deeper look into her husband’s finances when the Finnish entrepreneur left her. Robert Oesterlund swore in court that his fortune only totaled a few million dollars, but Pursglove could think of several family purchases that cost above and beyond that amount. She flew to the Bahamas to figure out what her husband was really worth. There she found an accounting statement that claimed Oesterlund was worth at least $300 million. As she packed her bags for the flight back home, her family’s fortune immediately began disappearing into various shell companies, bank accounts, and trusts under a worldwide financial system catering to the ultra rich. The system effectively offshores wealth and makes the richest people appear to own very little.
Over the next two years, Pursglove would rely on her wealth squad to untangle the defenses of the offshore financial world. It all started when Oesterlund created his businesses and was subsequently looking to avoid costly taxes. Eventually, he set up a Cook trust, suggested by his corporate counsel, who assured him he would be “untouchable.” As Pursglove’s lawyers began to figure out the scheme her husband was surmounting, they filed court documents for a divorce and to impose a sweeping asset injunction, which would prohibit Oesterlund from selling, merging, or borrowing against any of his assets and additional offshoring. The corporate fraud lawsuit proceeded in Florida, where the family’s companies were being run. It was eventually discovered that Oesterlund was using a Bahamas-based company to transfer all his assets and avoid all United States tax liability—a tactic referred to as “transfer pricing.” Pursglove’s attorneys claimed that Oesterlund began to shield assets from his wife as the divorce loomed near. Shortly after a judge ruled that Pursglove could see thousands of her husband’s documents, both sides’ lawyers met and discussed the possibility of Oesterlund going on the run if he had to fork the documents over. Consequently, this brought things to a head. Oesterlund would have to expose himself or threaten his fortune. Oesterlund’s one-time allies were now becoming his enemies to avoid fighting the greater good—the system. The wall of secrecy around Oesterlund’s accounts began to crumble. The case still remains open and the outcome is unknown, but it begs the question: is there justice in wealth battling wealth?
See Nicholas Confessore, How to Hide $400 Million, N.Y. Times, November 30, 2016.
Tuesday, November 29, 2016
Sarah Worthington recently published an Article entitled, Exposing Third-Party Liability in Equity: Lessons from the Limitation Rules, Equity, Trusts and Commerce Ch. 14 (Forthcoming). Provided below is an abstract of the Article:
This article provides a re-examination of third-party liability in equity. The exercise was prompted by a difficult case on limitation periods in equity, but the conclusions – if correct – have far wider significance. Three major points are made. First, it has long been conceded that the language of constructive trusts and constructive trustees is confusing. It is suggested here that the language disguises a relatively straightforward search for situations where there are property splits (trusts) or property management responsibilities (fiduciary responsibilities). Secondly, accessory liability in equity looks to be something of a misnomer, since it appears that the drive is not to find individuals with particular associations with the wrongdoer and shared liability for the primary wrong, but instead to find individuals who are themselves trustees or fiduciaries because of their particular association with the original managed property. Liability follows accordingly, and is primary not secondary liability. Finally, where there are fiduciary responsibilities for property management, liability is in two forms: compensation for loss to the managed assets; and disgorgement of disloyal gains. The former is distinguishable from common law compensation in its focus on remedying loss to the property fund, not the loss to individuals interested in the fund. These insights – in particular the fiduciary characteristics of third parties in equity, and the workings of equitable compensation – have significant practical consequences.
Donald Trump is planning to put his business assets into a blind trust run by his oldest children. However, he does not plan to meet the legal definition of a blind trust due to the trust not being managed by an independent party and him possibly having his hand in some of the decision-making. If he were to set up a true blind trust, he would need to appoint an independent trustee and liquidate his assets. On the other hand, Trump will be required to disclose his assets under the Ethics in Government Act.
See Debra Cassens Weiss, Trump Plans to Place His Businesses in a Blind Trust Run by His Children; Will It Resolve Conflicts?, ABA Journal, November 14, 2016.