Tuesday, September 19, 2017
David Horton recently posted an Article entitled, Borrowing in the Shadow of Death: Another Look at Probate Lending, Wills, Trusts, & Estate Law eJournal. Provided below is an abstract of the Article:
“Fringe” lending has long been controversial. Three decades ago, demand for subprime credit soared, and businesses started to offer high-interest rate cash advances, such as tax refund anticipation loans, payday loans, and pension loans. These products have sparked intense debate and are subject to a maze of rules. However, in Probate Lending, 126 YALE L.J. 102 (2016), a co-author and I examined a form of fringe lending that has gone largely unnoticed: firms that pay lump sums in return for an heir or beneficiary’s interest in a pending decedent’s estate. Capitalizing on a California law that requires companies to file these contracts in probate court, we analyzed seventy-seven loans that stemmed from deaths in 2007. In this companion Article, I report the results of a study of an additional twenty-two months of probate records. My research provides hard evidence about the multi-million dollar inheritance-buying industry, including the prevalence of loans, characteristics of borrowers, how often lenders are repaid, and annual interest rates. I then use this data to compare probate lending to other species of fringe lending and to outline how courts and lawmakers should regulate the practice.
Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.
Monday, September 18, 2017
John A. E. Pottow recently posted an Article entitled, Fiduciary Duties in Bankruptcy and Insolvency, Wills, Trusts, & Estate Law eJournal. Provided below is an abstract of the Article:
Although discussed nowhere in the U.S. Bankruptcy Code, fiduciary duties play a central role in guiding the administration of an insolvent debtor's assets. This book chapter explores the fiduciary obligations of trustees (including DIPs) under both statute and common law, with a special focus on the intrinsic conflicts that arise within the "menagerie of heterogeneous creditors" that constitute the claimants of a bankruptcy estate.
Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.
Saturday, September 16, 2017
Every Day is Bitcoin Pizza Day: What Clients and Estate Planners Need to Know About Virtual Currency
CoinMarketCap.com currently tracks the value of each of the 867 cryptocurrencies. They estimate the combined value of these currencies is in excess of $161 billion. The explosion of interest and purchase of virtual currencies is significant for estate planners given the intangible nature of the items purchased. There are numerous stories of early bitcoins users with millions of dollars’ worth of the currency passing away and losing their investment because unwary family members threw away passkeys. In this new currency age, it is vital that estate planners ask clients about their virtual holdings and provide advice about planning requirements needed to safeguard and distribute their investment.
See Murtha Cullina, Every Day is Bitcoin Pizza Day: What Clients and Estate Planners Need to Know About Virtual Currency, Lexology, September 6, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Friday, September 15, 2017
A planner’s failure to fully understand and track copyright termination rights can lead to severe repercussions for both client and planner alike. When discussing this subject with clients, planners should ask clients about whether they, a spouse, or close family members have owned or own any copyrights, if their client has registered, sold, assigned, or purchased a copyright, and if the client has any heirs that they would like to disinherit. At a bare minimum, planners must make sure their clients are cognizant of their termination rights and should help the client plan around these rights. This discussion should consider the statutory forced heirship mechanisms and its preference for testamentary transfers made solely through a will. For planners working with commercially successful clients wanting to leave a bequest of their copyrighted works to their private foundation, it is of the utmost import to make sure to explicitly identify these rights so they pass to the foundation and not through the residuary clause. A planner’s failure to discuss these issues and address them with clients can open up the potential for staggering lawsuits.
See Michael L. Duffy, Planning and Administering Copyrights in an Artist’s Estate, Probate and Property Magazine, October 2017.
Thursday, September 14, 2017
Nicole F. Stowell, Erik Johanson, & Carl Pacini recently published an Article entitled, The Use of Wills and Asset Protection Trusts in Fraud and Other Financial Crimes, 65 Drake L. Rev. 509 (2017). Provided below is an abstract of the Article:
According to the Internal Revenue Service, 2.9 million Form 1041 (domestic trust) tax returns were filed in 2009. It is predicted that beneficiaries will receive wealth transfers in the tens of billions passing via trusts. Accompanying this growth has been a proliferation of abusive estate planning, such as asset protection trust schemes to reduce income and tax liability; illegal techniques to depreciate personal assets, deduct personal expenses, and underreport income; and participation in money laundering. This Article highlights and analyzes wealth transfer and preservation fraud and trust schemes, scrutinizes both offshore and domestic asset protection trusts, and provides red flags of fraud to assist in the prevention and detection of wealth transfer and preservation fraud schemes.
Wednesday, September 13, 2017
The 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:
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?
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.
Thursday, August 24, 2017
Craig 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.
Tuesday, August 22, 2017
Julie 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.
Monday, August 21, 2017
Article on Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts
Steven 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.
Wednesday, August 16, 2017
The 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:
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:
- Enrolled Agents
- Certified Financial Planners
- Trust Officers/Administrators/Managers
- 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
- 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