Wills, Trusts & Estates Prof Blog

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.

Fiduciary Duties in Canada

Robert Flannigan (Professor, University of Saskatchewan College of Law) has recently posted on SSRN his article entitled Fiduciary Accountability Transferred, 35 Advocs. Quarterly 334 (2009).

Here is the abstract of his article:

The Supreme Court of Canada has toyed with the boundaries of fiduciary accountability for three decades. Some of the criteria it has advanced to identify when fact-based accountability will arise (e.g. vulnerability, power differential, reasonable expectation) are vague notions that potentially derail the conventional function of the jurisdiction. Specifically, the criteria may be taken to support the view that fiduciary accountabilityregulates the merits or fairness of the actions of fiduciaries. In BCE Inc. v. 1976 Debentureholders, the court now appears to have explicitly adopted that view, albeit without recourse to any of the criteria it had previously identified. It also appears to have compromised the strict operation of the conventional regulation. The decision represents yet another novel turn, and a radical one, in the court's mercurial intercourse with fiduciary accountability.

Hard Times are Hard on Everyone, Even the Super-Rich

The newest World Wealth Report, which is produced by Merrill Lynch and Capgemini, shows that the current financial crunch has impacted the wealthy as well as those living paycheck to paycheck. The number of "ultra high net worth individuals," those with at least $30 million to invest, decreased by almost 15% last year.  The number of "high net worth individuals," those worth $1 million without their home, decreased by 15 percent.

Whether the super-rich are experiencing "hard times" is debatable, but they have been affected by the general economic downturn.

See Megan Murphy, Credit crunch takes toll on super-rich, Fin. Times, June 24, 2009.

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

Financial Adviser 101

Here are some things to consider to protect yourself when picking a financial advisor:

1. The advisor's background: start with http://www.finra.org, http://www.adviserinfo.sec.gov/, www.cfp.net, and www.fpanet.org.

2. References from other clients: remember to rely more on references with similar investing goals.
3. The advisor's payment method: this could help you tell if the advisor is pushing something out of self-interest.
4. Checks and balances: is your investment going straight to the advisor or to a thrid-party custodian?
5. The advisor's track record: ask about specific situations and the combination of all clients the advisor handles
6. Get it in writing: whatever the agreement, spell it out!
7. Check with other professionals: what other professionals think about your advisor can be helpful.

 

See Shelly Banjo, Seven Questions to Ask When Picking a Financial Advisor, April 13, 2009.

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

Tainted Organ Transplants Lead to Litigation

More than 300,000 organ transplants have occurred in America since 1994, with fewer than 30 of these cases involving transmission of a disease not identified prior to transplant.  But in those few cases, there have been devastating results:

• In 2002, a man died of a rare brain cancer one year after receiving an organ from a donor who had the same cancer. 
• In 2006, A New Jersey man received a lung from a heavy smoker and was diagnosed with cancer a few months later.
• In 2007, five people contracted HIV from a donor with a history of high-risk sexual behavior.

• In 2007, several people died after receiving rabies-infected organs from the same donor.

The federal Uniform Anatomical Gift Act, which was designed to create informed consent, uniform laws, and protected donors, appears to provide immunity donor banks and donor who act in good faith.  This hasn't stopped the litigation, and a Massachusetts court recently held that the provision does not protect against common law tort actions based on decisions about organs suitable for transplant that are not made in good faith. 

The demand for organs leads some to conclude that the acceptable range for transplantable organs should be expanded with informed consent requirements being more stringent.

See Carmel Sileo, Tainted-organ transplants trigger legal action, immunity challenged, Trial, March 2009, at 16.

Assisted Reproduction: Case Law, Statutes, and Future Suggestions

Raymond C. O'Brien (Professor of Law, Columbus School of Law) has recently published his article entitled The Momentum of Posthumous Conception: A Model Act, 258 J. of Contemporary Health & Law Policy 332 (2009).  Excerpts from the introduction to the article are below:

This Article addresses the scenario of when, through advanced medical technology, a procedure is performed resulting in the birth of a child more than three hundred days--a time suggested by some statutes--after the death of the gamete provider. . . .The essential element is that the act, which results in a future birth, occurs after the death of one or both of the gamete providers. This is the essence of posthumous conception. That is, once the egg and sperm are brought together through assisted reproductive technology to form an embryo, both or either of the persons who donated the sperm and egg or embryo are dead, perhaps for a long time. If this is the point of conception, then the issue arises as to whether the resulting posthumously conceived infant should qualify under the law for paternity, inheritance and benefits. How long should the law wait for conception before terminating status? The law strives for certainty and medical technology has made certainty an elusive prey.

The decisional law we are about to discuss reveals how uncertain society is regarding how to address the paternity, inheritance or benefits associated with the posthumously conceived infant.

The Model Act, recently approved by the American Bar Association, “does not either advocate or oppose the use of [advanced reproductive] technologies, but accepts the reality that they are being used by many people today and proposes legal solutions and protections for those involved.” Nonetheless, using the Model Act as a precipitating vehicle, this Article recommends further steps that may be taken to accommodate persons who harbor sincerely held objections to the medical technology now available to reproductive clinics.

In tribute, this Article will first, briefly describe the evolution of assisted reproductive technologies that allow for human posthumous conception. Second, this Article will discuss the existing cases and how the courts have defined the issues and resulting common law to provide a solution to the need for certainty. Third, statutes that have been proposed and even adopted will be discussed. Lastly, in conclusion, this Article will offer some suggestions as to the future of the debate.

Choreographer Prepares For Two Deaths

Merce Cunningham, a 90 year old choreographer, is planning for his death and the death of his dance company.  The artist is confronting "the vexing problem of how choreography created by a lone master and interpreted by a dedicated company should be treated once the master has died."  Daniel J. Wakin, Merce Cunningham Sets Plan For His Dance Company, NY Times, June 9, 2009.

Cunningham has decided that when the time comes, his dance company will provide a two-year, international tour before shutting down.  Tickets to New York shows will cost $10.  The Merce Cunningham Trust will then take control of detailed records of the dances for licensing purposes and provide the company dancers with a one-year severance pay, as well an art collection of sets designed for Cunningham throughout his career.

Cunningham's careful planning efforts are an attempt to preserve his legacy and prevent an ugly battle over his dance licenses after his death.

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

SeeDaniel J. Wakin, Merce Cunningham Sets Plan For His Dance Company, NY Times, June 9, 2009.

Writing With Dead People

Artist Nadine Jarvis can help those who want to live on after death by using the carbon from their cremated remains to make pencils, about 240 of them.  The pencils, called Carbon Copies, are inscribed with the donor's name and year of birth and death. 

See Mary Ann Lucidine, Pencils Made From Cremated Remains, Drawn: The Illustration and Cartoon Blog, April 4, 2007.

'Profits Interests Gifts Under Section 2701: I Am Not A Monster'

Richard Dees (Partner, McDermott Will & Emery LLP) has published an article entitled Profits Interests Gifts Under Section 2701: I Am Not A Monster, Tax Analysts, 2009.

Here is a summary of the article:

Section 2701 provides special gift tax valuation rules for transfers of a partnership or corporate interest when the entity has multiple classes of equity. Congress enacted section 2701 to deal with potential valuation abuses it identified in the preferred stock recapitalization. Section 2701 was enacted to replace section 2036(c) that Congress believed unnecessarily restricted the flexibility of family business owners to arrange their affairs. Ironically the complexity of section 2701 has led estate planners to urge their clients to impose similar restrictions on family entities to avoid imagined disastrous gift tax costs. This concern has particularly impacted planning for a gift of a profits interest in a hedge or venture capital fund where its complex character clearly runs afoul of section 2701.

As families began to use simpler proportional profits interests in partnerships to shift investment risks among family members, estate planners have begun to reevaluate whether section 2701 even applies to partnerships with only this simplified profits interest. This report represents the author’s year long struggle to apply section 2701 in this context, despite having been involved with its drafting almost 20 years ago. The author concludes that these simplified profits interests are outside section 2701, subject perhaps to a few tweaks. Moreover, a careful analysis of section 2701 reveals that it will produce a value which differs little from the fair market value analysis of a profits interest under the tax provisions of chapter 12 when a complex hedge or venture capital profits interest is given away. In fact using the subtraction method under section 2701 to value those ‘‘bucket’’ profits interests may be preferable to other valuation approaches.

Whether you are a corporate lawyer with little knowledge of section 2701 or an experienced estate planner, this report will surprise you. But remember, section 2701 — unlike section 2036(c) that it replaced — is not a Monster, so be not afraid.

Stories From an Estate Planner's Experience

Barry M. Fish and Les Kotzer have authored a book entitled Where's there's an Inheritance: Stories from Inside the World of Two Wills Lawyers (Continental Atlantic Publications 2009). 

The authors share humorous, moving, and wrenching tales to provide some insight and instruction for those planning the disposition of their estate, including the story below:

He was a widower with no children, but he was blessed with money, many nieces and nephews — and a unique plan for deciding who should benefit from his generosity.

By the time he was in his mid-80s, his nieces and nephews believed the impression he gave that he had trouble hearing. They gathered often for holidays and family events, and they talked about how much they liked — or disliked — their uncle.

At his 90th birthday party, he stood to say a few words of thanks. "I've been waiting to say these words for the last few years: I can hear perfectly. I have always had perfect hearing, and I have heard everything you have ever said to me and about me."

As a stunned silence swept the room, he proceeded to tell them what he had heard — and later used that information as he prepared his will.

Greg Katz, Touching, angry tales from world of wills, Deseret News, June 9, 2009. 

Special thanks to Larry D. Stratton (Law Offices of Larry D. Stratton, Arcadia, CA and author of the Planner's Thoughts blog) for bringing the this book to my attention.

French Form of Civil Union Popular with Opposite-Sex Couples

In France, the Civil Solidarity Pact, or PACS, are civil unions available to both same-sex and opposite-sex couples.  The status gives traditional marriage benefits, such as joint tax returns and intestate succession.  Additionally, the status is easier and cheaper to terminate than a traditional divorce.  As a result, itis estimated that 92% of the PACS obtained last year were by opposite-sex couples who are either opposed to traditional marriage or who are using the status as a step toward marriage.

See Edward Cody, Straight Couples in France Are Choosing Civil Unions Meant for Gays, Wash. Post, Feb. 14, 2009.

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

Parents: Consider a Trust as Part of Your Estate Plan

Parents should consider creating a trust that would take care of their children if something happens to the parents.  Reasons for creating a trust include: 

• Parents have substantial assets or money that children would inherit.
• Ability to delay the age at which children get the money outright.
• Conditions can be placed on inheriting, such as going to college.
• Avoiding the hassle of needing court permission to spend money, which may arise with other arrangements.

• Parents can control how the money is spent and pick the trustee.

For more information, see Stacy L. Bradford, Deciding If Your Kid is Trust-Worthy, Wall St. J., June 3, 2009.

Special thanks to Jim Hillhouse (Wealth Counsel), Joel Dobris (Professor of Law, UC Davis School of Law), and James S. Galco (Trust Officer, Park National Bank) for bringing this article to my attention.

The Legal Responsibilities of Owning More Than One Home

A recent Financial Times article has this warning for those who own multiple homes in different states:

The worst-case scenario occurs when you divide your time casually among your various homes. In a landmark, decades-old case still cited by attorneys, a Campbell Soup heir with homes in three states had his estate taxed in all three because he had failed to establish his intent to become a permanent resident of any one state. That case went to the US Supreme Court, where the heir lost.

The Moral: Take steps to establish your desired legal domicile if you own more than one home.

See Grace Weinstein, Homes across states can open door to taxman, Fin. Times, Jan. 27, 2009.

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

'Why You Need A Will'

Forbes has published an article on the disadvantages of intestacy, including a link to an intestacy calculator. 

The article points out that only a few states - California, Maine, New Jersey, Washington, and the District of Columbia - offer registries where unmarried couples can register, allowing the couple to be treated as spouses for intestacy purposes. 

See Ashlea Ebeling, Why You Need A Will, Forbes, January 19, 2009.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this article to my attention.

Estate Planning for a Military Equipment Collector

Imagine estate planning and estate administration for a client who owns 65 military tanks, runs a private museum, and has a mile-long model railway.  This is just part of the estate left behind by Jacques Littlefield, which is now managed by the Military Vehicle Technology Foundation.

For more information on this estate, see Stephen Miller, For Big Collecter of Tanks, Panzer Was Last Hurrah, Wall St. J., Feb. 7, 2009.

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

Golden Coffins Under Attack

The recent financial downturn has left a sour taste in the mouths of many when it comes to the salaries of big company CEO's, including "golden coffins" - generous posthumous payouts to senior management.  According to Joann S. Lublin, Activists Push for Lid on 'Golden Coffin' Benefits, Wall St. J., March 9, 2009,

Dozens of companies offer generous death-benefit packages to recruit and keep executives. Many allow heirs to collect previously unvested equity. Some promise posthumous severance payouts, supercharged pensions or years of postmortem salaries.

Activist shareholders are trying to prevent these golden-coffin deals for at least 14 major companies.  See the above cited artricle for a list of the companies and more information on these benefits.

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

Conservation Easements Analyzed

Nancy A. McLaughlin (Robert W. Swenson Professor of Law, Univ. of Utah College of Law) and W. William Weeks (Adjunct Professor of Law and Director, Conservation Law Clinic, Indiana Univ. Bloomington School of Law) have posted on SSRN their article entitled In Defense of Conservation Easements: A Response to 'The End of Perpetuity', 9 Wyoming L. Rev. (2009).

Here is the abstract of their article:

This article critiques the arguments offered in favor of treating donated conservation easements as unrestricted charitable gifts (that is, as fungible or liquid assets in the hands of their government or land trust holders). It also discusses the practical and potential constitutional problems associated with proposals to change state law to permit government entities and land trusts to sell, trade, release, extinguish or otherwise terminate the conservation easements they hold outside of judicial cy pres proceedings.