Wills, Trusts & Estates Prof Blog

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

Wednesday, September 13, 2017

ACTEC: Request for Input on Discretionary Trusts

LogoThe American College of Trust and Estate Counsel (ACTEC) recently responded to a question posed by the Office of Government Ethics concerning income beneficiaries of discretionary trusts. Below is a short summary of their response:

Question Addressed

In a Notice published in the Federal Register on January 3, 2017, the Office of Government Ethics requested comments on the following question: Are there any circumstances under which an eligible income beneficiary of a discretionary trust might, in the absence of a vested remainder interest, be able to compel the trust to make a distribution or payment?

Concise Answer

Under statutory provisions and judicial decisions of most United States jurisdictions, an income beneficiary of a discretionary trust may be able to demonstrate that the trustee breached fiduciary duties in not making a trust distribution to the beneficiary and therefore compel a distribution or payment.

September 13, 2017 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Thursday, August 24, 2017

Fired UBS Advisor Reignites Palm Beach Scandal over Rich Widow

TsaiCraig Price, a former UBS AG senior vice president, was more than a little surprised when he saw the $2,600 tab he and colleagues had racked up at an upscale restaurant in Palm Beach, Florida. It was not the actual size of the bill that shocked Price, but the person who paid it: Helga Marston, a sickly, 90-year-old UBS client. More disconcerting was the fact that Marston had not been in attendance. Her broker, Dennis Melchior, a UBS employee and Marston’s trust manager had used trust funds to pay the tab. Also in attendance was Melchior’s girlfriend, the now infamous Nancy Tsai, a long-time confidant of Marston who also had power-of-attorney over the trust.

As Price starting digging deeper, he found that Tsai used trust funds to buy a Bentley, take a private jet for a vacation to Toronto, and also made an attempt to remove funds to buy a penthouse. Price alerted his superiors of the activity and Melchior was subsequently fired. Tsai was later arrested for exploiting an elderly person and grand theft auto. This behavior conflicted with her public persona as a charitable donor to a number of causes. Few were aware that her generosity was funded by someone else’s cash. Unfortunately, Marston passed away the day after Tsai’s arrest and all the charges were subsequently dropped.

All of these events spanned over the course of 2014, but another chapter of this story has since been unfolding. Price, the initial whistleblower, was fired by UBS who claimed he traded non-public information. Price claims this is a lie and that UBS is retaliating for his actions related to the Marston incident. More generally, Price is claiming that there could have been no way that UBS executives were unaware of Tsai and Melchior’s intimate relationship and their connection with Marston. UBS has denied these allegations.

Despite this unpleasantness, Price’s unplanned departure has not been a total loss, as he has been successful in pulling a number of clients away from the company. When Lynn Scheel visited UBS to pick up paperwork in preparation to move with Price, she said she was met in the lobby by a UBS advisor who said, “I can’t believe you’re going with that criminal.” Undaunted, Scheel moved her assets to Price.

See Neil Weinberg, Fired UBS Advisor Reignites Palm Beach Scandal over Rich Widow, Private Wealth, August 16, 2017.

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

August 24, 2017 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, August 22, 2017

Financial Fraud: Lengthy Prison Term for Estate Planner Who Betrayed Clients

ScroogeJulie Kronhaus enjoyed a model life as an estate planner. She was highly regarding by professionals in the field and was often recommended for her breadth of knowledge and trustworthiness. Personally, Kronhaus spent lavishly on clothing, took numerous vacations, and reveled in regular trips to New York and Europe.

Unfortunately for her clients, Kronhaus was funding this extravagant lifestyle with monies taken from their trust accounts. A particularly troublesome victim of Kronhaus’s theft was a mother with a child who had been awarded a settlement resulting from a medical malpractice suit. Kronhaus failed to make payments to the client and may have delayed a number of payments due to her spending. An out-of-state lawyer, another  victim, grew suspicious of Kronhaus’s activities and reported her to law enforcement. The report led to Kronhaus’s 2016 arrest, an eventual 10-year prison sentence, and an order to repay $3 million in restitution.

See Financial Fraud: Lengthy Prison Term for Estate Planner Who Betrayed Clients, FBI, August15, 2017.

Special thanks to Victoria Sutton, Paul Whitfield Horn Professor, for bringing this article to my attention. 

August 22, 2017 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Monday, August 21, 2017

Article on Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts

ArbSteven D. Baker recently published an Article entitled, Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts, 9 Est. Plan. & Community Prop. L.J. 191 (2017). Provided below is an abstract of the Article:

With the recent decision in Rachal v. Reitz, the Supreme Court of Texas enforced a trust provision requiring binding arbitration of disputes between a trustee and a beneficiary, joining Florida and Arizona in explicitly recognizing the validity of such clauses. Settlors and testators who seek to minimize the delays and costs of potential conflict between beneficiaries will enjoy the favorable decision. But while the Rachal court answered, at least in part, the question of whether the settlor of a Texas trust can impose arbitration on the trustee and beneficiaries, the conscientious estate planning practitioner must also consider whether a client should do so in its will and trust instruments.

Accordingly, the first part of this article discusses the advantages and disadvantages of arbitration—a vehicle for avoiding litigation developed for the commercial world—in the realm of settling trust controversies. The second part of this article considers the impact of the Rachal opinion, as well as statutes in other jurisdictions that have recognized the use of such provisions. The third part addresses the particular limitations of mandatory arbitration in the context of resolving trust disputes. And the last part discusses the implementation of trust arbitration, both in terms of the summarizing the procedures set forth in the Texas Arbitration Act (TAA) and the drafting of the clause itself.

August 21, 2017 in Articles, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility, Trusts | Permalink | Comments (0)

Wednesday, August 16, 2017

CLE on Estate Administration Boot Camp

0000000 CLEThe National Business Institute is holding a conference entitled, Estate Administration Boot Camp, which will take place on Thursday, August 16, 2017 at the DoubleTree by Hilton Dallas - Love Field in Dallas, TX. Provided below is a description of the event:

Program Description

Everything You Need to Know About Effectively Administering an Estate

Are you fully confident in your knowledge of the latest court and tax rules and the most effective transfer tools to ensure each client's estate is laid to rest according to the decedent's wishes, with minimal tax burden? This comprehensive 2-day instruction will give you all the skills you need to administer estates that include trusts and/or business interests without a hitch. Register today!

  • Don't miss any crucial notice and filing requirements when opening the estate - learn what must be done right away.
  • Get helpful forms and checklists that will help you in administration.
  • Understand how income and estate tax deductions interact and find the most advantageous way to structure the tax returns
  • Learn how to use disclaimers more effectively.
  • Clarify what must be done when the trust becomes irrevocable.
  • Protect your professional reputation with a practical legal ethics guide focused on trusts and estates practice.
  • Prevent mistakes in final petition and ensure each estate is closed quickly and without disputes.

Who Should Attend

This two-day, basic level seminar is designed for:

  • Attorneys
  • Accountants/CPAs
  • Enrolled Agents
  • Certified Financial Planners
  • Trust Officers/Administrators/Managers
  • Paralegals

Course Content

DAY 1

  • Forms of Administration and When They are Used
  • First Steps and Notices, Executor Duties, Opening the Estate
  • Marshalling the Assets
  • Key Intestacy Laws You Must Know
  • Handling Debts and Claims Against the Estate
  • Spouse Elective Share and Disclaimers
  • Trusts That Affect Estate Administration

DAY 2

  • Income Tax Returns
  • Portability and Estate, Gift, GST Taxes
  • Business Interests in Estate Administration
  • Legal Ethics in Estate Administration
  • Closing the Estate and Final Accounting
  • Estate and Trust Contests, Disputes, Challenges

Continuing Education Credit

 

Continuing Legal Education

Credit Hrs State
CLE 12.00 -  OH*
CLE 12.00 -  TX*

International Association for Continuing Education Training – IACET: 1.20

National Association of State Boards of Accountancy – CPE for Accountants: 14.00 *

* denotes specialty credits

August 16, 2017 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Income Tax, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Tuesday, August 8, 2017

2017 Bruce M. Stargatt Legal Ethics Writing Competition

NNB0575r2-2x3-H-200x300The Delaware Bar Foundation is holding its 2017  Bruce M. Stargatt Legal Ethics Writing Competition.  Information about the competition is below:

 

The Delaware Bar Foundation is pleased to announce the…

2017 BRUCE M. STARGATT LEGAL ETHICS WRITING COMPETITION

The Competition: This writing competition is made possible by an initial generous gift to the Delaware Bar Foundation from Mrs. Barbara Stargatt and her family in memory of her late husband, Bruce M. Stargatt. Bruce was a distinguished Delaware lawyer who, among many other accomplishments, was a founding partner of Young, Conaway, Stargatt & Taylor, LLP, and a past president of the Delaware Bar Foundation and the Delaware State Bar Association.

Writing Topic: In keeping with Bruce Stargatt’s keen interest in legal writing and the ethical practice of law, we invite scholarly papers concerning ethical issues in the practice of law. Beyond this general description, the precise issue to be dealt with is in the author’s discretion.

Eligibility: The competition is open to: (i) students enrolled in, and 2017 graduates of any American Bar Association accredited law school, (ii) individuals who have registered for or have taken the 2017 Delaware Bar Examination, (iii) law clerks currently employed by a member of the Delaware judiciary, and (iv) Delaware attorneys admitted for no more than five years.

Prizes and Publication: Cash prizes of $3000, $1000 and $500 will be awarded to the top three papers. The first place paper will be published in “Delaware Lawyer” magazine (a publication of the Delaware Bar Foundation, distributed quarterly without charge to all members of the Delaware Bar). The author of the first place paper will be invited to receive his or her prize at the Delaware State Bar Association/Delaware Bar Foundation seminar in Wilmington in the fall of 2017. Prizes will not be awarded if the judges determine that a sufficient number of entries do not meet the appropriate standards.

Deadline and Submission: (1) Papers must be submitted by midnight (EDT) on September 15, 2017.(1) Papers must be submitted by midnight (EDT) on September 15, 2017.(2) Papers must be submitted electronically to mflynn@delawarebarfoundation.org.(3) Direct questions to Bruce M. Stargatt Legal Ethics Writing Competition, Delaware Bar Foundation, 100 W. 10th St., Suite 106, Wilmington, DE 19801, or 302-658-0773, ormflynn@delawarebarfoundation.org.(4) Prize winners will be informed on or before November 1, 2017.

Rules: (1) No paper that has been previously published in any form will be considered. However, papers written for course credit will be considered as long as they have not been published.(1) No paper that has been previously published in any form will be considered. However, papers written for course credit will be considered as long as they have not been published.(2) Each paper must be the original work of the submitting author. The author must execute and submit with her/his paper the License Agreement attached hereto.(3) The length of the paper should not exceed 2500 words, including the title page, body, footnotes, figures and tables, if any. The Delaware Bar Foundation reserves the right to edit papers for publication due to space constraints when necessary.(4) Citations should be in standard Bluebook form.(5) A cover page that includes the author’s name, contact information and eligibility to enter the competition should be included with the paper at the time of submission.

August 8, 2017 in Estate Planning - Generally, Professional Responsibility, Writing Competitions for Students | Permalink | Comments (0)

Wednesday, August 2, 2017

Article on Aspects of Loyalty

Lionel Smith recently published an Article entitled, Aspects of Loyalty, Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:

One of the many current controversies around fiduciary obligations is whether the duty of care and skill owed by a fiduciary is properly called a fiduciary duty. Another is what is the content of the fiduciary duty of good faith, and whether it stands apart from the duty of loyalty, or rather is merely an aspect of it. This paper builds on recent work that identifies loyalty as a legal requirement for fiduciary decision-making, which is not, however, a Hohfeldian duty. This understanding calls for further investigation into the other aspects of the legal implementation of loyalty. In relation to both the duty of care and the duty of good faith, the paper asks why it might matter whether such duties were fiduciary duties, or duties of loyalty, and how we can properly answer these questions. It concludes that there are several aspects to how the law implements loyalty.

Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.

August 2, 2017 in Articles, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Wednesday, July 12, 2017

Accumulated Wealth? Here's What to Do Next

AdvisorWhen individuals accumulate and save substantial amounts of wealth, there is a point where it becomes difficult to know exactly where to place and invest the funds. There are many in-person and online resources that provide advice tailored to a client’s specific needs. But before choosing a firm, do some research. Figure out what it is exactly that you need. If you are in the market for a multi-generational financial planner, then online resources may not be appropriate.

It is also extremely important to get to know your potential advisor. Ask about their methodology and how they plan to invest your funds. Look at their returns from year to year. Finally, and possibly most importantly, make sure your advisor is who they say they are, are actually backed by the credentials on their card, and have not been subject to disciplinary action by any professional organization.

See Robert Powell, Accumulated Wealth? Here's What to Do Next, USA Today, July 9, 2017.

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

July 12, 2017 in Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Thursday, July 6, 2017

In Re Portnoy Analysis

JerseyIn Re Portnoy, a 1996 bankruptcy case, was the first in a line of decisions dealing with foreign asset protection trusts (FAPT). In this case, Portnoy personally guaranteed the liabilities of his company. When he became aware that his company was nearing insolvency, he transferred a substantial portion of his property to a Jersey trust and filed for bankruptcy. A major consideration of the court was whether New York or Jersey law would govern. Two factors the court analyzed in choosing New York law were Portnoy’s fraudulent transfer of  his assets and the detriment to his creditors, and the fact that all of the parties, excluding the trustee, were located in the U.S.

Portnoy’s general reasoning laid a very strong groundwork for future court’s deciding FAPT trust cases.  Future courts would decide against FAPT holders on several other grounds, but at the core of future reasoning is a general disdain for debtors who try to structure their affairs in a way to defrauds creditors.  It’s simply not a practice that courts want to condone through their decisions.

See Hale Stewart, Guest Blogger Hale Stewart Analyzes In Re Portnoy (Asset Protection Case), Wealth & Risk Management Blog, June 30, 2017.

July 6, 2017 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, July 4, 2017

Estates Of Madoff's Dead Sons Reach $23 Million U.S. Settlement

Madoffnewyork (1)The estates of Bernie Madoff’s deceased sons have reached a settlement agreement with the U.S. government. In total, the estates will hand over $23 million to the victims of Madoff’s Ponzi scheme. Irving Picard, the court-appointed bankruptcy trustee, sued the estates and accused the brothers of squandering over $150 million on lavish lifestyles with fraudulently obtained monies. Picard has recovered nearly $11.5 billion of the $17 billion Madoff took from victims.

Picard, a lawyer with Baker & Hostetler LLP in New York, never believed the brothers’ claim that hadn’t known about the fraud until Madoff confessed to it. He claimed the fraud at Madoff’s investment advisory unit overlapped with the businesses overseen by his sons. And he rejected a claim by the brothers’ lawyers that the men earned their money through their work and that their families deserved to keep it.

See Erik Larson, Estates Of Madoff's Dead Sons Reach $23 Million U.S. Settlement, Private Wealth, June 26, 2017.

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

July 4, 2017 in Current Events, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)