Wills, Trusts & Estates Prof Blog

The "Lottery Curse" Strikes Again

I have often reported on this blog about the difficulties lottery winners face after striking it big (see Jack Whittaker Update).  Persons who suddenly obtain large amounts of money, such as performers, professional athletes, lottery winners, or personal injury plaintiffs, tend to deplete these windfalls rapidly because they have never learned how to manage their money wisely.

The "lottery curse" has struck again!  In 2007, Doris Murray won $5 million in the Georgia lottery.  Doris was recently found stabbed to death in her home and her ex-boyfriend is being held in connection with her murder.  See AP, $5 million lottery winner found slain, signonsandiego.com, May 7, 2008.

Police report that the murder may have been a result of an argument stemming from the couple's breakup.  You can imagine how angry a boyfriend might get seeing the "gravy train" leaving the station.

It is interesting to note that it seems that Doris received good advice regarding her winnings.  She continued to live in approximately the same life style she had previously enjoyed.  She elected to take the winnings in 20 annual payments which would net her after taxes about $172,000 per year.  It is reported that she was going to use the money to create a trust fund for her grandchildren.

More on the "Middle-Class Wealthy"

As discussed earlier on this blog, there is a growing segment of the population which many would consider "rich" but which consider themselves merely "middle-class," that is, people with a net worth of $1 million to $10 million.

Based on research from their book The Middle-Class Millionaire, Russ Alan Prince, Marcia S. Nelson, Hannah Shaw Grove, & Lewis Schiff have published the results of a survey in their essay Millionaire Intelligence Amount Private Client Attorneys: The Attitudes and Habits of Highly Successful Private Attorneys.

Here are the key points of this survey:

Based on our survey of 418 private client attorneys on matters relating to work-life balance and wealth accumulation, we uncovered several "best practices. First, choosing to be a private client attorney over another legal specialty neither hurts you nor helps you create significant wealth. Rather, what matters most are the traits, behaviors and attitudes you demonstrate as an attorney.

Second, attorneys at all levels of net worth have the same perception of how money can improve their lives. However, successful attorneys implement those ideas more effectively. Also, private client attorneys who have high net worth exhibit similar behaviors and traits to successful people in other fields.

Third, private client attorneys with higher net worth exhibit different work habits from those with lower net worth. In particular:

• They work longer hours and consider themselves to be more available to work during off hours.
• They consider themselves to be better connected in their communities.
• They are more determined to succeed when negotiating with others.

Private client attorneys with high net worth excel at one or more of the talents identified in this research paper. They can increase their success by focusing on areas in which they are less proficient. Private client attorneys with lower net worth can increase their success by improving their work behaviors in any one of the areas identified by high-net-worth attorneys as crucial to success.

How do millionaires think?

The following are some of the key findings from the third annual Wealth in America study conducted for Northern Trust:

Millionaire households have become more advisor-oriented over the past two years, and less reliant on their own efforts.  In particular, millionaire households increasing are seeking advice on * * * tax reduction strategies [and] estate plan or asset transition. * * *

In general, millionaires have very altruistic motivations for their charitable giving: supporting causes that they personally believe in and making a difference in their community * * *.

While seemingly well-positioned for a comfortable retirement, millionaire households nonetheless have concerns about issues or events that might affect their finances.  Chief among their concerns are health related, specifically the rapid rise in health care costs and their health personally or the health of a spouse.

In addition, millionaires place a high level of importance on leaving an estate to their heirs. * * *

Lastly, almost one-half of millionaires have established a personal trust.

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

Heir Discusses Inheritance

For a short but interesting news report about a daughter who recently received a large inheritance from her mother, watch A Mother's Last Gift, CNN.com.

What I find interesting about this report is that the daughter claims to be grieving her mom's death and feeling guilty about spending her mom's money but she has already quit her job.  Perhaps her story demonstrates why it is important for parents to leave property in trust for their children rather than leaving it to them outright.

'Tis the Marriage (and Pre-nup) Season

Attorneys are reporting an increase in interest in prenuptial agreements as the "marriage season" approaches.

The following is from Kathleen Pender, Planning to get married? Who has the info on prenups? I do., SF Chron., May 4, 2008:

There are no reliable figures on how many couples enter into prenuptial agreements, but attorneys say their numbers are growing as more people marry later in life and multiple times.

San Francisco family law attorney Stephen Ruben sees more Baby Boomers entering into such contracts after marriage - known as post-marital agreements - as their parents die. "They want to preserve their inheritances so it doesn't go to their spouse. They want it to remain within the bloodline," he says. * * *

"Everybody ought to consider one. In the process, they will learn what state law says about property rights once they marry," says Katherine Stoner, a family law attorney in Pacific Grove (Monterey County) * * *

You should definitely consider a prenup if:

• You've been married before, especially if you have children.  * * *
• You have substantial assets. * * *
• You started a business before marriage. * * *
• One partner has a big debt.

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

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).

The “Middle Class” Wealthy

The following is from Keith Whitaker, Just Don't Call Them Rich, WSJ.com, March 5, 2008:

The key to riches in America, according to Alan Prince and Lewis Schiff, is not thinking like a millionaire but thinking like...a member of the middle class.***

Even Bill Gates, in a recent interview, couldn't bring himself to use the R-word to describe his own sumptuous condition. Part of the hesitation may be simple prudence: Wealth-holders know that assets can be fugitive. The subprime crisis has only reinforced this painful truth.***

Prince and Schiff focus on the more than five million American households with a net worth of $1 million to $10 million. True to form, the members of such "MCM" households, according to the authors' extensive survey, don't think of themselves as rich. They feel themselves to be "middle class."***

To help draw their class portrait, Messrs. Prince and Schiff offer a few high-profile MCM examples, like Bruce Spector, the backer of PinnacleCare, and Edward Goldman, the founder of MDVIP, both "concierge" medical-care providers.***

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

Survey shows earners feel more secure about their wealth than heirs

According to Thomas Kostigen, Sophisticated Investor, marketwatch.com, April 15, 2008:

Most wealthy people earn their money, and because they earned it they feel more secure about keeping it. That's what a new survey reveals about wealth and values.

PNC Wealth Management conducted the survey of people with more than $500,000 of investable assets.***

"An overwhelming number of affluent Americans earned their wealth and are more likely to feel secure during challenging economic times compared to peers who inherited their money," according to PNC.***

A couple of things separate the earners from the inheritors: First, earners were in control of making their money, and therefore feel more confident about preserving it or making even more. Second, earners likely took large risks to achieve wealth. As we all know, as risk increases, so does return. Accordingly, earners are likely more comfortable with the concept of risk.***

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

The Special Needs of Women in the Estate Planning Context

The American Bar Association Section of Real Property, Trust and Estate Law and the ABA Center for Continuing Legal Education are sponsoring a teleconference and live audio webcast on May 6, 2008 entitled Working with Women Clients in Estate Planning:The Difference is More Than Just Changing Pronouns.

Here is a description of this program:

Women today control more than 50% of the total personal wealth in the United States and the percentage is expected to rise in the coming decade. However, many American women have not done estate planning to protect their assets, their families, and themselves. Since most women will survive their husbands, the need for estate planning continues and often becomes more important for widows.

Working with women clients requires a different approach than working with men, and estate attorneys need to understand the nuances of designing client services for this growing market.

Attend this program to:

• Learn about the communication styles of women
• Find out how women make decisions
• Become aware of women's expectations
• Learn how to engage women in the planning process

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.

Wife Vents on YouTube

According to Wife takes divorce drama online, vents scorn via YouTube, CNN.com, April 16, 2008:

Some prominent New York divorce lawyers couldn't think of another case where a spouse -- in this instance, the wife of a major Broadway theater operator -- had taken to YouTube to spill the secrets of a marriage in an apparent effort to gain leverage and humiliate the other side.***

In a tearful and furious YouTube video with close to 150,000 hits to date, former actress and playwright ("Bonkers") Tricia Walsh-Smith lashes out against her husband, Philip Smith, president of the Shubert Organization, the largest theater owner on Broadway.

She goes through their wedding album on camera, describing family members as "bad" or "evil" or "nasty," and talks about how her husband is allegedly trying to evict her from their luxury apartment. She also makes embarrassing claims regarding their intimate life[.]***

Felder explained that his client was "acting out of passion." He also called the prenuptial agreement she'd signed with her husband, who is a quarter-century older than her, "stupid.

Note: this YouTube video has been “removed by the user.”

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.

Gift of brokerage account accomplished by opening account under donee’s name and Social Security number

A father opened a brokerage account in his son’s name and Social Security number.  The son knew nothing of the account until after it was closed by someone other than the father and the property transferred to a joint account in the name of the father and another child.

The son sued the brokerage firm and was awarded the value of the account at the time it was closed plus costs.

The court in Wasniewski v. Quick and Reilly, Inc., 940 A.2d 811 (Conn. 2008), upheld the judgment, holding that the father had made a completed gift of the brokerage account and that the son was the third party beneficiary of the contract between the father and the brokerage firm.

Waiver of homestead exemption in unsecured agreement

A retainer agreement between an attorney and his client purported to waive the client’s homestead exemption if the attorney obtained a lien to secure payment of legal fees and costs.

In an extensive opinion reviewing the law throughout the United States, the Florida Supreme Court held that a waiver of the homestead exemption in favor of other than a secured creditor is invalid.  Chames v. DeMayo, 972 So. 2d 850 (Fla. 2007).

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.

Disclaimer may not defeat worker’s compensation insurer’s subrogation right

The decedent was shot and killed while performing his duties as an employee and his wife received benefits under the decedent’s employer’s worker’s compensation insurance.

The wife then brought a wrongful death proceeding against her husband’s killer and reached a settlement which would be distributed to her and the couple’s children pursuant to the intestacy statute.

Because the employer would be subrogated by statute to her rights in the wrongful death settlement to the extent of the benefit’s she had received, the wife disclaimed her right to the wrongful death proceeds.

In Gillette v. Wurst, 937 A.2d 430 (Pa. 2007), the court held that a disclaimer cannot defeat the statutory subrogation right.

The Van Gogh Legacy

The following is from Robert L. Moshman, Esq., Vincent van Gogh, published in the April 2008 issue of The Estate Analyst:

The van Gogh estate isn't set up as a marketing machine that generates huge earnings. There aren't tours as with Graceland for the Elvis estate.**** But consider what the output of Vincent van Gogh is worth today as another gauge of value.

In 1990, 100 years after the artist's death, van Gogh's Portrait of Dr. Gachet sold for $82.5 million which was then the highest price ever paid for a painting. There are 900 paintings and 1,100 other works by van Gogh, though not all are as valuable. If the 900 paintings averaged $50 million apiece that would amount to a mind-boggling $45 billion.***

But let us flash forward 100 years or 500 years. Many rock stars will have come and gone and there may be scant interest in a pompadoured hip shaker of the mid 20th century.***

By contrast, the finest examples of Van Gogh, being rare collectibles coveted by museums, will continue to be the ultimate status symbol for the collections of the super rich.

University Endowments and the Role of Donors’ Wishes

According to Karen W. Arenson, When Strings Are Attached, Quirky Gifts Can Limit Universities, NYTimes.com, April 13, 2008:

[T]he Seeger money, which must be spent only on matters Greek, is now worth $33 million, multiplying through aggressive investing like the rest of Princeton’s endowment. So the university offers Greek, Greek and more Greek[.]

“Institutions do get shaped by the interests of donors,” said Robert K. Durkee, vice president and secretary of Princeton.***

Recent interviews with college officials show that while many restrictions are for broad uses like faculty chairs and student aid, others are less central to the functioning of a modern university. Some are outright quirky.***

College officials say they try to be receptive to donor wishes, even when they sometimes seem strange. That happened at Wellesley College, when Leonie Faroll, a 1949 graduate, asked the college to use her gifts for the college’s power plant. When she died in 2003, those gifts totaled $860,000.***

Estate Planning for Non-Married Couples

Kathleen Ford Bay (Attorney at Law, Blazier, Christensen, Bigelow, and Virr, P.C.) has recently published her article entitled Untying the Knot– Until Death and Taxes Do Us Part, RPPT eREPORT (Feb. 2008).

Here is an excerpt of the summary of her article:

To be cautious and practical, always discuss with same-sex and unmarried couples the following:

1. Wills (avoid testamentary libel);
2. Financial powers of attorney;
3. Health or medical powers of attorney;
4. Advanced Directives (Living Wills);
5. Revocable trusts and transfer of assets to such trusts (consider the mortgage company; insurance on assets; title insurance on home);
6. Declaration or nomination of guardian or conservator and stating who can never be a guardian;
7. Beneficiary designations (insurable interest) and non-probate property;
8. Providing for children (adoption and other issues); and
9. Funeral Directive.***

Donations to Museums Decrease as Collectors Build Their Own

According to Lauren A.E. Schuker, The Firestorm over Private Museums, online.wsj.com, April 4, 2008:

Collectors looking to show off their riches used to donate their art to a museum. Now many are building their own museums instead, and directors at existing institutions are up in arms.***

To fight back, museum directors are resorting to a variety of tactics, such as expanding their space to display more works and appease donors who don't want their gifts sitting in the basement. Others are appointing collectors with their own spaces to their boards, in hopes of eventually getting important work.***

In another blow to established museums, more collectors are forgoing donations and starting foundations that essentially serve as lending libraries, loaning out works to institutions around the world.***

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

The Many Aspects of Estate Planning

The following is from Ian Driscoll, Parents must put children in the know, us.ft.com, Mar 24 2008:

"Tax planning is a very important part of estate planning; sometimes the only part," says Susan Schoenfeld, principal and associate fiduciary counsel at New York-based Bessemer Trust. "But it shouldn't be, in the perfect world, the sole motivator."

Done wisely, estate planning can help parents enshrine values and educate children about fiscal responsibility. It can also forestall sibling conflicts that may follow a parent's death.***

The temptation to control one's children from the grave also afflicts incentive trusts (sometimes known as ethical trusts), an estate planning tool that has attracted much attention in recent years.

A variant of the incentive trust matches dollar-for-dollar distributions according to a child's income. Another type might disperse funds when children meet benchmarks - graduating from college, performing philanthropic work or remaining drug-free. But some advisers warn incentive trusts must be used judiciously, if at all.***

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

Proposed Treasury and IRS Rule Making May Have Significant Tax Consequences

James V. Roberts (Attorney at Law, Glast, Phillips & Murray P.C.) has recently published his article entitled New and Revamped 529 Plan Regulations Soon to Be Proposed, RPPT eREPORT (2008).

Here is the opening paragraph to his article:

On January 17, 2008, Treasury and the Internal Revenue Service issued an Announcement of Proposed Rule Making (“ANPRM”) regarding Section 529 college tuition plans. This ANPRM should be of interest to every estate planner and return preparer because it seeks to: (I) propose an anti-abuse rule (with changes to the preparer penalty provisions, all such rules now assume larger importance); (II) determine the estate, gift and GST tax results of contributions, transfers and withdrawals; and (III) create rules for making the 5 year election, addressing some income tax issues, and creating new record keeping requirements.

What Does “Rich” Mean Today?

According to Tom Sullivan, Are You Rich?, finance.yahoo.com, March 18, 2008:

Yes, it takes more than $10 million to be seen as rich these days. It takes more like $25 million. Not only is that the minimum for the red-carpet treatment at a growing number of banks, it is also, in the view of many experts, the sum needed for a truly cushy retirement, one free of financial worry.***

More and more rich people certainly believe they need at least $25 million. In a recent survey by Chicago-based Spectrem Group, 25% of affluent folks said it takes $25 million to be rich, and another 8% said $100 million. Those two groups combined weren't all that much smaller than the 45% who cited $5 million.***

True, only a tiny portion of all Americans meet our definition of rich: Just 0.20% of households have net worths of $25 million or more. But in absolute numbers, the group is considerable.***

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

Having too many investment accounts may not be wise estate planning

The following is from Mickey Meece, As Accounts Pile Up, Less Becomes More, NYTimes.com, March 18, 2008:

The unwieldy task of looking after many financial accounts, the cost of paying for their upkeep and the risk of losing track of money in the process can lead to diminishing returns. In fact, investors who cannot tally their accounts on two hands might want to consolidate, financial advisers say.***

It can be especially overwhelming for people who have inherited a lot of money or sold all or part of a business, said Hannah Shaw Grove, a private wealth specialist.***

This year, investors are expected to move more than $300 billion out of 401(k)’s into I.R.A.’s, according to Cerulli Associates, a research firm specializing in the financial services industry. As people become more serious about managing all their accounts, said Carolyn M. Clancy, executive vice president for personal investment at Fidelity, they want to know that their beneficiaries will be taken care of and that they will have lower fees, lower or no loads on mutual funds and access to investment guidance — all in one place.***

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

Estate Planning from Fresh Perspectives

The following is from a slide show posted on NYTimes.com, entitled Inheritance Reconsidered, discussing various estate planning strategies chosen by affluent individuals:

With the largest intergenerational transfer of wealth in American history now under way, Martin Rothenberg and others are reconsidering the meaning of inheritance. ***

Fearing complacency, Dal LaMagna, founder of the Tweezerman company, set up trusts to provide only small incomes for his children. "If you give them more, it's counterproductive to their motivation," he said.***

Frank Butler, a retired chief executive, wanted to give his fortune to charity. His wife, Ruth, however, wanted to subsidize the education of their three grandchildren. So they divided their resources in half, creating an educational trust from Mrs. Butler's side and a charitable foundation from Mr. Butler's[.]***

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

Deficit Reduction Act and State Administration of the Medicaid Program

Julia Belian (Visiting Associate Professor of Law, University of Missouri-Kansas City School of Law) has recently published her article entitled State Implementation of the Optional Provisions of the Deficit Reduction Act, 9 Marq. Elder's Advisor 63 (2007).

Here are excerpts from the conclusion to her article:

The Deficit Reduction Act is a complex piece of legislation that modifies an already complex federal law. It offers a myriad of complex options to states that were already operating widely divergent versions of the Medicaid program.***

Increasing health care costs force consumers to face difficult choices, and the government likewise feels the strain of rising costs. Whether Medicaid was “working” before the DRA became law is irrelevant because, regardless of the ability to get health care to those in need, the costs had reached the point of crippling state budgets. Post-DRA Medicaid is not inherently more complex than pre-DRA Medicaid. States can still choose to adopt different approaches to the various problems they face, all in the hopes of improving health care delivery and reducing health care costs. However, the new state options under the DRA do seem to change the landscape in key ways.***

Disintermediation within the model of market evolution

J.W. Verret has recently published an article entitled Economics Makes Strange Bedfellows: Pensions, Trusts, and Hedge Funds in an Era of Financial Re-intermediation, 10 U. Pa. J. Bus. & Emp. L. 63 (2007).

Here is the introduction to this article:

In Strong Managers, Weak Owners, Professor Mark J. Roe articulates an expansive theory to explain the evolution of the fragmented market structure in the United States. He posits that political choices led to fragmentation in the American financial markets, thus guiding the evolution of the Berle-Means Corporation. His view is sometimes supplemental to, but often in contradiction with, conventional economic efficiency or functionalism arguments that are used to explain that evolution.

This Article examines Professor Roe's theory. It will use the political influences that Roe credits with fragmentation to understand current changes in market structure, including the growth of hedge funds, in general, as well as the advent of activist hedge funds that are re-shaping corporate governance. It will end by exploring some unique problems facing pensions and trusts that invest in hedge funds. The result will be a deeper understanding of the Disintermediation Thesis within the model of recent market evolution. This Article will also offer a policy prescription for government regulators that oversee the fiduciary intermediaries who invest in these new vehicles.

Research reveals rising life expectancy gap among different segments of population

The following is from Robert Pear, Gap in Life Expectancy Widens for the Nation, NYTimes.com, March 23, 2008:

New government research has found “large and growing” disparities in life expectancy for richer and poorer Americans, paralleling the growth of income inequality in the last two decades.***

The gaps have been increasing despite efforts by the federal government to reduce them. One of the top goals of “Healthy People 2010,” an official statement of national health objectives issued in 2000, is to “eliminate health disparities among different segments of the population,” including higher- and lower-income groups and people of different racial and ethnic background.***

While researchers do not agree on an explanation for the widening gap, they have suggested many reasons, including these:

Doctors can detect and treat many forms of cancer and heart disease because of advances in medical science and technology. People who are affluent and better educated are more likely to take advantage of these discoveries.***

Making Gifts to Heirs Now May Reduce Taxable Value

The following is from Brett Arends, Market Turmoil Creates Opening To Enrich Heirs, online.wsj.com, March 15, 2008:

It isn't all bad news. This winter's market turmoil is creating a golden opportunity to pass on stocks, mutual funds or other appreciating assets to your heirs.

Plunging stock prices mean you can give more of those assets under the gift-tax ceiling, while the collapse in long-term interest rates has suddenly widened a little-known tax loophole on certain estate-planning trusts.

Put the two together and you could save a bundle on taxes by making bequests right now, especially if you've got an estate in the millions.***

The bottom line is that making the gift this way can slash the taxable value, allowing you to pass more to your heirs.***

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

Why people fake their death

In Missing Persons, published in the March 2008 issue of The Estate Analyst, Robert L. Moshman, Esq. discusses different instances where people have faked their own death:

Sometimes people fake their own deaths to escape marriage or criminal prosecution or to collect life insurance. In a recent case, John Darwin escaped financial difficulties and was believed lost at sea. His wife collected on two insurance policies. But five years later, Darwin returned “smelling dreadful” and ultimately was discovered and arrested.***

Former congressional candidate Gary Dodds was recently convicted of faking his own death in New Hampshire, with the possible motive of gaining a sympathy vote.***

Typically, faking one’s own death can range from a misdemeanor (such as for false swearing) to a felony (such as fraud).

Effective estate planning is crucial for keeping vacation property in the family

The following is from Wendy S. Goffe’s article entitled From NASCAR Condominiums To Private Mausoleums: Keeping The Vacation Home In The Family (With Sample Tenancy In Common Agreement), published in the February 2008 issue of the ALI-ABA Estate Planning Course Materials Journal:

Few families successfully transfer ownership of a cabin or vacation property by accident. Families that do accomplish this Herculean feat do so only with a great deal of advanced multi-generational planning, often with mechanisms to adjust the plan as circumstances and needs change.***

The legal mechanism for transferring the property is only the first of many challenges. Following the transfer, the next generation must determine how to maintain the property; how to pay taxes, insurance, and maintenance; and how to divide use of the property among the family members.***

Once the family members are informed of the various options (which may include setting aside portions for conservation purposes, selling portions to raise capital to support the remaining property, and transferring portions to succeeding generations), the first step in creating a master plan is to have the facilitator interview each family member.***

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

Economic Downfall and Its Effect on Charities

According to Stephanie Strom, Weakness in Economy Isn’t Hurting Charities, NYTimes.com, March 14, 2008:

Despite the economic downturn and fears of recession, major charities say their fund-raising has not fallen off.***

In fact, some 64 percent of the organizations that have responded so far to the Association of Fundraising Professionals’ annual survey on fund-raising have reported bringing in more money in 2007 than the year before.***

Revenue at the March of Dimes rose 4.5 percent in 2007 on an unaudited basis, said Carol Portale, the organization’s senior vice president for customer relationship management and direct response.***

Darell Hammond, chief executive of KaBOOM!, a nonprofit group that builds and maintains playgrounds, said he and his senior management team were keeping a close eye on revenue to see what effect, if any, the organization would feel from economic weakness. The 12-year-old group has long been a favorite of corporate donors, and declines in corporate donations tend to be steeper during hard times than do reductions in gifts from other sources.***

Estate Advisor’s Role in Family Wealth Planning

The Le Van Company has recently posted on its website an article entitled Family Mission Statements: What Estate Advisors Need to Know. This article was also published in the March 2008 issue of the Estate Planning magazine.

According to this article:

Inevitably, boomers will enlist other estate planning advisors to support healthy wealth objectives, to recommend or evaluate a myriad of healthy wealth resources and resource persons[.]*** As a first step toward healthy wealth, wealthy families are counseled to draft a “family mission statement”. What is the estate advisor’s role in the drafting process?***

[O]rganizing should begin with the family’s relational estate, its most valuable nonfinancial asset. The relational estate rests on three fundamental building blocks: genetics, family history and family heritage[.]***

The goal of mission statements is to help keep the peace in affluent families. By agreeing on a basic set of principles, families hope to avoid lawsuits between relatives about money. They also hope to draw up moral guides for future generations, so that kids and grandkids will inherit values as well as wealth.***

Child Labour and Fiduciary Accountability of Parents

Robert Flannigan (Professor, University of Saskatchewan College of Law) has recently posted on SSRN his article entitled Child Labour: The Partial Fiduciary Accountability of Parents. 

Here is an abstract of his article:

Parents have open access to the family-focused labour of their infant children. We impose no fiduciary proscription on the appropriation of that labour. The social consensus is premised on the benefits that accrue to the child, the family and the community. In other respects, parental access is closed or limited. The labour cannot be unreasonable, or wrongly exploitive. Nor may parents take the external earnings of their children. The constraints reflect the consensus as to the proper scope of open parental access. Beyond their open access, the opportunistic impulses of parents are regulated by fiduciary accountability.

Surrogate Motherhood in India – A Growing Enterprise

According to Amelia Gentleman, India Nurtures Business of Surrogate Motherhood, NYTimes.com, March 10, 2008:

An enterprise known as reproductive outsourcing is a new but rapidly expanding business in India. Clinics that provide surrogate mothers for foreigners say they have recently been inundated with requests from the United States and Europe, as word spreads of India’s mix of skilled medical professionals, relatively liberal laws and low prices.

Commercial surrogacy, which is banned in some states and some European countries, was legalized in India in 2002. The cost comes to about $25,000, roughly a third of the typical price in the United States.***

Surrogacy is an area fraught with ethical and legal uncertainties. Critics argue that the ease with which relatively rich foreigners are able to “rent” the wombs of poor Indians creates the potential for exploitation.***

“Surrogates do it to give their children a better education, to buy a home, to start up a small business, a shop,” Dr. Kadam said. “This is as much money as they could earn in maybe three years. I really don’t think that this is exploiting the women. I feel it is two people who are helping out each other.”***

Growing Dislike of the Super Rich and Possible Solutions

The following is from John Thornhill, How super-rich can avoid lynching, FT.com, Feb. 22, 2008:

We have, it seems, reached that point in the economic cycle when resentment is rising against the rich.***

That sentiment has marked the US presidential election campaign as fears of recession grip the country.***

While wealth creation and distribution should remain free, Carnegie supported high inheritance taxes. “Of all forms of taxes this seems the wisest,” he wrote. “By taxing estates heavily at death the state marks its condemnation of the selfish millionaire’s unworthy life.”

Much has changed since Carnegie’s day. Great fortunes are made in ways that Carnegie would have probably considered unworthy.*** Pro-business politicians now denounce “death taxes”. But Carnegie’s conclusion still provokes thought and should inspire action: “The man who dies rich dies disgraced.”

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

Feud in Family Business Often Leads to Company Downfall

The following is from Jonathan Guthrie, Tragic pitfalls of making an heir the boss, FT.com, Feb. 28, 2008:

Professional advisers sometimes mutter a damning phrase after first meeting an aspirant chief executive who got a job, along with his DNA, from Dad - "clogs to clogs in three generations".

Typically, Grandpa sets the business up, building it to modest size. Pa turns it into a global force across five time zones, or at least across greater Northampton. Junior runs the company into the ground through incompetence or sheer indifference.***

Still, a little greyness is better than the worst horrors of family business feuds, as explored in Family Wars.***

Authors Grant Gordon, fifth-generation member of the William Grant & Sons family, and Nigel Nicholson of London Business School provide a useful breakdown of the "monumental flaws" in the character of L.S., who died in 1999, and therefore cannot sue.***

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