Wills, Trusts & Estates Prof Blog

Charitable Giving Declines With the Economy

A study by the Giving USA Foundation concludes that charitable giving in America fell by 5.7% last year.  While this is much less than the 40% drop in endowments and the stock market, the decline has been especially hard on charities that help individuals in need with basic necessities, which experienced a 15% drop in donations.  

The findings were adjusted to take into account inflation.

For more information on giving in other areas, such as education, see Stephanie Strom, Charitable Giving Declines, A New Report Finds, NY Times, June 9, 2009.

'Amending & Terminating Perpetual Conservation Easements'

Nancy McLaughlin (professor of law, University of Utah) & Benjamin Machlis (J.D. Candidate, University of Utah) have recently published their article entitled Amending and Terminating Perpetual Conservation Easements, Prob. & Prop., July/Aug. 2009, at 53.

The following is the introduction to the article:

Over the past several decades, landowners have donated perpetual conservation easements encumbering millions of acres to government entities and to charitable conservation organization known as land trusts. Landowners make these charitable gifts for a number of reasons, including a desire to ensure the permanent protection of their land and to take advantage of tax benefits.

Until fairly recently, little consideration has been given to precisely what it means to protect land "in perpetuity" with a conservation easement. But as perpetual conservation easements have begun to age, and the protected lands have begun to change hands, questions have arisen regarding the circumstances under which these instruments can be amended or terminated.

This article outlines the current guidance on this issue and offers some drafting suggestions. Because of space constraints, it focuses on perpetual conservation easements donated to land trusts or state and local government entities, in whole or in part, as charitable gifts and for which the donor claims or could claim tax benefits (tax-deductible conservation easements). This article is not intended to imply that conservation easements conveyed in other contexts will not be subject to the same or similar equitable principles.

Conductor and Wife Commit Suicide Together

Sir Edward Downes, Principal Conductor at the BBC Philharmonic from 1980 to 1991, and his wife, Joan, committed suicide hand-in-hand on Tuesday, July 14. 

The details are as follows:

• Joan, 74, was diagnosed with cancer and given weeks to live.
• Sir Edward was 85, deaf, and could barely see.
• The deaths occurred at the Dignitas clinic in Switzerland.
• The couple drank a clear liquid and fell asleep within minutes.
• Their two children witnessed the deaths.

See Robert Mendick and Kiran Randhawa, BBC conductor Sir Edward Downes and wife commit suicide, Evening Standard, July 14, 2009.

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

Wealth Strategies Journal Posts New Articles

The following articles have now been posted on the Wealth Strategies Journal and are available for download:

Drafting a Flexible Life Insurance Trust, by Julius H. Giamarco, Esq.

The Practical Planner: Brooke Astor Estate: Questions and Lessons, by Martin M. Shenkman, CPA, MBA, JD.

Successful Retirement Depends on Asset LOCATION, by Herbert K. Daroff, JD, CFP.

Special Needs Children & Estate Planning

Sebastion V. Grassi, Jr., (attorney, Grassi & Toering, PLC) has recently published an informative article entitled Estate Planning for a Family with a Special Needs Child, Prob. & Prop., July/Aug. 2009, at 15. 

The article provides a general overview of areas to consider when an estate plan includes a special needs child.  Highlights of the article are:

A discussion of an inter-vivos stand-alone, third-party created and funded special needs trust, which will allow the special needs child to inherit without risking eligibility for SSI and medicaid.

Sample language for a contingency clause that will transform an inheritance into a special needs trust should one become necessary later (planning of the possibility of future accidents).

Directions for handling assets already owned by the special needs child so that these assets will not interfere with eligibility for benefits.

Documents to consider when planning for a mentally competent, adult special needs child. 

Man Previously Worth Millions Claims Debt After Wife Files for Divorce

Scott Young, a successful British business man, claims he went from an estimated worth of £400 million in 2006 to a negative worth of £27 million today.  His estranged wife, soon to be ex-wife, is now seeking maintenance, up to half of his assets, and an explanation for where all the money went.

The court hearing the wife's lawsuit didn't believe Young's insolvency claim and ordered him to pay his wife's court costs for the day.  Young was representing himself because he lost public funding for his lawyer.

See Tom Kelly, I'm Broke! Judge warns tycoon he'll go to jail unless he explains how £400 million fortune 'vanished' when his wife filed for divorce, MailOnline, June 30, 2009.

Special thanks to Peter Parlapiano (2011 MBA/M.S. PFP candidate, Texas Tech) for bringing this article to my attention. 

Rules for Tax Return Preparers

Brian C. Bernhardt (partner, McGuireWoods LLP) has recently published his article entitled Tax Return Preparer Penalties: The New Rules of Code Sec. 6694, Part I, Prob. & Prop., July/Aug. 2009, at 63.

Below is the introduction to the article:

Until May 2007, Internal Revenue Code Sec. 6694, which imposes monetary penalties on certain tax advisors, was largely ignored. On May 25, 2007, however, Congress substantially revised Code sec. 6694, and the changes caused a great gnashing of teeth and wringing of hands amount tax advisors for more than a year. Under the new rules, even if a tax advisor never signs a clients tax return, never looks at a client's tax return, and never answers a specific tax return question, the IRS may subject the tax advisor to these rules.

The IRS quickly provided interim guidance and Proposed Regulations, at first, to delay implementation of the new rules and then to provide initial rules for compliance.

On October 31, 2008, Congress further revised Code Sec. 6694 to mitigate the most objectionable aspect of the 2007 revisions. On December 15, 2008, the IRS issued Final Regulations, a revenue procedure, and administrative guidance explaining the application and operation of revised Code Sec. 6694.

This article provides a summary and overview of the new rules, their application, and some practical concerns that remain.

New York Court Addresses Estate Planning Malpractice

The Supreme Court of New York, New York County, recently dismissed a widow's claim alleging estate planning malpractice. 

Decedent bequeathed half of his estate to his wife, Plaintiff.  Plaintiff sued, arguing that Defedants committed malpractice by failing to remind decedent of a separation agreement from a prior marriage.  Plaintiff alleged that as a result, the agreement was not figured into decedent's plan for Plaintiff's inheritance and plaintiff lost $9 million as a result.

Defendants moved for summary judgment, arguing there was no attorney-client relationship between Defendants and Plaintiff.  Plaintiff argued there was such a relationship and alternatively, Plaintiff argued there was a relationship of "near privity" that permitted her claim.

The court held that although Defendants made separate estate plans for both Plaintiff and decedent and represented them jointly on other issues, there was no joint estate plan to create an attorney-client relationship.  Despite a letter from Defendants to Plaintiff with regard to a change to decedent's will, there was insufficient contact to establish "near privity."

According to Mark Fass, "this decision raises the question of who, if anyone, may sue in New York for malpractice when attorneys make mistakes in planning estates."  Widow Lacks Standing to Sue Husband's Lawyers Over Mishandled Will, Judge Finds, NY L.J., July 10, 2009;

See Leff v. Fullbright & Jaworski, LLP, 2009 NY Slip Op. 31445(U) (NY County June 30, 2009); See also

Special thanks to Bridget J. Crawford (Professor of Law and Associate Dean for Research and Faculty Development, Pace Law School) for bringing this case to my attention.

Romance After Death

Jack Benny, hollywood comedian, died of pancreatic cancer in 1974.  Benny left money for a local florist to deliver one long stem rose to his wife of 47 years every day after his death. Benny's wife lived for nine years after Benny died.

See TruTV, Weirdest Wills.

The History of U.S. Inheritance Laws

Adam J. Hirsch wrote an interesting article on the evolution of inheritance laws in the United States.  The article is divided by time period.

The colonial period: 

• Authority over inheritance of personal and real property was handled by one court as opposed to two as it was in Great Britain.
• Intestacy laws turned to a more equal, if not totally equal, intestacy rule for children.
• Virginia introduced the holographic will as an exception to witness requirements.

The American Revolution:

• Equal treatment of children in intestacy spread to all states.
• Entails, or restrictions on land ownership limited to the testator's descendants, were abolished in most states.

The Nineteenth Century:

• Inheritance rights of a surviving spouse grew: Texas introduced the first surviving spouse homestead right guaranteeing the surviving spouse a life estate in the family home; more states gave personal property inheritance rights to the surviving spouse; all but one state provided a forced share for a surviving spouse; the surviving spouse begins taking through intestacy to the exclusion of children.
• The use of trusts greatly expanded: The spendthrift trust developed to keep creditors away from trust funds, business and pension trusts emerged, and the prudent investor rule emerged.

The Twentieth Century

• The Rise of Federal Taxes: The estate tax, which had been used only during military crisis, became a permanent institution; the gift tax was enacted simultaneously; the generation skipping tax was later introduced.
• Trusts Expand: the dynasty trust resulted when states began abolishing the rule against perpetuities and the living trust became an inexpensive and popular alternative to a will.

The author notes that the field of law as a whole remains a low priority for legislatures, and as a result, new cases involving alternative reproductive technology are solved with laws enacted as early as 1836. 

See Adam J. Hirsch, Inheritance: United States Law, 3 Oxford International Encyclopedia of Legal History 235, (Stanly N. Katz ed. 2009).

Book Examines Revenue Ruling 59-60

Mercer Capital has published a new book entitled Revenue Ruling 59-60 at 50: Rediscover Fair Market Value, Mercer Capital (2009).

Here is an excerpt from the preface of the book:

Tagging a text with the label “classic” should not be done carelessly. But 50 years after its initial release, few would disagree that Revenue Ruling 59-60 deserves the title. Written in the spare, unadorned style of a government publication, the Ruling is a compact storehouse of enduring practical wisdom for business appraisers and the users of appraisal reports.

At Mercer Capital, we decided the 50th anniversary of the Ruling’s release was a fitting time to compile this book. Having been actively appraising privately held businesses for over 25 of the 50 years since the Ruling’s issuance, we find ourselves often returning to the Ruling, whether for guidance in novel situations or simply to confirm some intuition. In short, it is a trusted companion.

Our purpose in writing this book is twofold: first, to offer a guided tour through the Ruling, pointing out some of the most prominent features of the landscape (and providing the occasional warning about rough terrain); second, to pull back the curtain a bit, granting a non-technical view of how appraisers (at least this group) attempt to translate the guidance found in the Ruling into actual valuation engagements.

Massachusetts AG challenges Defense of Marriage Act

On July 8, Massachusetts AG Martha Coakly filed a federal lawsuit claiming the federal Defense of Marriage Act is unconstitutional.  The details are below.

• The Defense of Marriage Act defines marriage as the union of one man and one woman.
• As a result, same-sex marriages are not eligible for many federal benefits, including social  security survivorship benefits and federal estate and gift tax benefits.
• The lawsuit was filed in U.S. District Court of Massachusetts against the U.S. Dep't. of Health, Dep't. of Veterans Affairs, and others.
• The lawsuit asserts that the Act is unconstitutional because it violates the state's sovereign authority to regulate marriage.
• The lawsuit also asserts that the Act is unconstitutional because it exceeds the permissible restrictions congress can place on federal funding.

See Sheri Qualters, Masachusetts AG challenges Defense of Marriage Act, Nat'l L.J., July 8, 2009.

Hospice Care for Fido

Hospice care for pets with terminal illnesses, similar to hospice care provided for humans, is an emerging trend across the United States, and it provides an alternative to the traditional method of relief, euthanasia.  Pet hospice provides comfort to both the pet and the pet owner by making our four-legged friends comfortable during their last days.

Information about pet hospice can be found at the following links:

• Pethospice.org
• Angelsgate.org
• Pawspice.com
• Specialneedspet.org

 See Jim Humphries, Hospice for our Pet Family Members, July 1, 2009

For information on pet planning, see Estate Planning for Pet Owners.  

Pension Fund to Benefit from Jackson's Death

There's good news for Dutch pension fund ABP, which owns the rights to some of Michael Jackson's songs.  According to the Telegraph, "Jackson's solo album sales in the United States jumped from 10,000 copies in the week before his death to 422,000 in the week end[ing] June 28."  Amanda Andrews, Michael Jackson's death set to boost Dutch pension fund, Telegraph, July 2, 2009.

Family Limited Partnership Case Analyzed

Prof. Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled Jorgensen: A Familiar FLP Story, Tax Notes, 2009. 

Here is the abstract of the article:

Jorgensen provides a common FLP story with a familiar conclusion. Under section 2036, the estate did not receive those coveted FLP discounts and paid taxes on the full value of the assets transferred to their FLPs. The court presents a careful, logical, and well-reasoned decision that .should provide guidance in the FLP area to taxpayers

Book Provides Useful Guide for Dealing With the Inevitable

Jane Brody (columnist, NY Times) has published her book entitled Jane Brody's Guide to the Great Beyond: A Practical Guide to Help You and Your Loved Ones Prepare Medically, Legally, and Emotionally for the End of Life, Random House (2009). 

Not only does the book cover legal issues that can arise, like advanced directives, organ donation, and assisted death, the book also provides practical advice on issues such as dealing with grief, losing a child, and a bad prognosis.  The book also provides helpful checklists, anecdotes, and cartoons, making the written text all the more approachable for, and applicable to, the reader. 

Selecting the best grant-making charitable entity

Stephanie B. Casteel (partner, King & Spalding LLP) has recently published her article entitled Philanthropy and Choice of Grant-Making Entity in a Changing World, Prob. & Prop., March/April 2009, at 52.

Here is the introduction of her article:

The Pension Protection Act of 2006 (PPA) imposes new rules on supporting organizations, private foundations, and donor-advised funds, the primary types of charitable entities clients create to perpetually support other public charities.  This article discusses these new rules and how they affect the type of grant-making charitable entity that will be most appropriate for clients, depending on their goals and desires.

Intestate Succession under the Catalan Code

Maurici Perez Simeon has recently posted on SSRN his article entitled Legal Rights v. Will When Testator's Beneficiary Predeceases the Testator, InDret, Volume 3, 2008.

Here is the abstract of his article:

Section 144.2 of the Catalan Code of Succession provided that whenever a testator's beneficiary predeceased the testator, his issue should take his share. Since the Catalan Code of Succession entered into force, there has been an important debate among academics regarding whether the issue of a predeceased beneficiary should take before the other testator's beneficiaries in proportion to their shares and/or before the "vulgar substitution." The underlying debate is the role that legal presumptions should have for the interpretation of testamentary provisions.

Section 423-8 of the Catalan Civil Code's Book Four, recently approved, sets forth a similar provision, even though presenting new challenges regarding the scope of the above-mentioned rule and its judicial interpretation.

Farms and the Federal Estate Tax

Don Hurst (USDA, Economic Research Service) has recently posted on SSRN his article entitled Federal Tax Policies and Farm Households, Economic Information Bulletin 54.

Here is the abstract of his article:

Significant changes in Federal individual income and estate tax policies have occurred over the last 10 years. Analysis suggests that changes in Federal tax provisions affecting both individual and business income taxes have reduced average tax rates for all farm households, resulting in the lowest tax burden on farm income and investment in a decade. Similarly, an analysis of the changes to Federal estate tax policies suggests that increases in the value of property that can be transferred to the next generation free of the estate tax, combined with special provisions for farmers and other small businesses, have greatly reduced the number of farm estates subject to the tax and the amount owed. While nearly 10 percent of commercial farm estates could owe tax in 2009, only 1 to 2 percent of all farm estates are estimated to be subject to the Federal estate tax this year.

Enjoying Art as Collateral

Art Capital Group specializes in lending to art owners in need of cash.  The art owners put of their painting as collateral, which Art Capital will sell for a commission and repayment of the original loan in the event of a repayment default. 

The average loan: $5 million with 2 years for repayment.  This means your average art owner need not apply as only serious art collectors will have collateral in the form of art worth this much. 

See Felix Salmon, A visit to Art Capital Group, Rueters Blog, June 10, 2009.