Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Sunday, December 21, 2014

5 Will Drafting Tips


While no one likes to think about his or her own death, it is important to be educated and prepared about end-of-life financial requirements so that any money, possessions or debts you leave behind are distributed exactly the way you plan.  Below are tips to avoid common will drafting mistakes and ensure your possessions, finances and loved ones are taken care of after you are gone. 

  1. Understand the Process. Because there are multiple elements that go into creating an estate plan, it is important to learn about the basics of making a will.  Each state has different legal requirements, thus, you must be clear about what a will includes, the limitations, how many witnesses you need, and the like.
  2. Work With a Lawyer.  Professional guidance will ensure you are interpreting the law properly and creating a binding legal document. 
  3. Carefully Select Witnesses and Executors.  Make sure the people who will carry out your final affairs after your death are trustworthy.  It is also a good idea to have a backup executor in case the person you originally designated dies before you or is unable to serve.
  4. Include Small Details.  Consider establishing a trust and include sentimental belongings so nothing falls to intestacy or state inheritance law.  This will also prevent family feuding about your intentions.
  5. Tell Someone Where It’s Located.  A will’s instructions can only be followed if it is found after your death, hence, it is important to inform your executor or family members where it is stored. 

See AJ Smith, 5 Tips for Writing Your Will, ABC News, Dec. 20, 2014. 

December 21, 2014 in Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Article on Trust Protectors

Trust1J. Andy Marshall published an article entitled, Trust Protectors--Increasing Trust Flexibility and Security While Decreasing Uncertainty of Liabilities For Doing so: How Amending Ark. Code Ann. 28-73-808 to Better Conform With the Modern Trend of Clarifying Trust Protection Could Effectively End the Fiduciary Guessing Game in Arkansas, 35 U. Ark. Little Rock L. Rev. 1137 (Summer 2013). Provided below is an excerpt from the introduction of the article.

The year is 2040. 1 Sadly, death found you some twenty years ago. You lived a remarkable life though, blessed with a long and rewarding career in art. As it turns out, your paintings have noticeably increased in value over the past few years. So much so that the University you left them to in a trust agreement recently made quite the profit when it sold them to a modern art museum in a neighboring state. The University had fallen into financial hardship. But with your thoughtful contribution of more than $ 60 million in now-liquidated artwork and the blessing of a court, it will worry no more.
Before you died, you executed a testamentary trust that conveyed your gallery to the University to maintain as trustee for the benefit of the public. You probably did not recognize it then, but your attorney seemingly failed to get your full input before drafting the trust. The limitations he placed on the use of your property were astounding. He even went so far as to state that the University could only display your gallery at the University to educate the public. Even more startling, he stated that the University could never sell the gallery for profit. Indeed, the Attorney General nearly prevented the University from selling your gallery, claiming that it was obligated to keep the pieces on display for the public per the terms of your trust.

December 21, 2014 in Articles, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Saturday, December 20, 2014

Berkeley Art Museum Acquires The Steven Leiber Collection

Berkeley Art Museum

The University of California Berkeley Art Museum and Pacific Film Archive has acquired the Steven Leiber collection of Conceptual art and ephemera as well as Leiber’s library of Conceptual art reference and artists’ books.  Steven Leiber passed away in 2012; he was a world-renowned dealer, scholar, and collector with a special interest in Conceptual art. 

The acquirement of his personal collection was made possible through a bequest from Phoebe Apperson Hearst, by exchange, a partial gift of the Steven Lieber Trust, and gifts from Andy and Deborah Rappaport, Robin Wright, Frances Bowes, Alexandra Bowes, and proceeds from the Marcia Simon Weisman Foundation Fund and the Friends and Trustees Acquisitions Endowment Fund. 

The newly acquired collection includes about 300 rare and significant works by American and European Conceptual artists from the 1960s, 1970s, 1980s, and over 700 books, catalog, and reference materials.  “This collection is an embodiment of the most radical, thoughtful, and innovative art being made anywhere in the world from the 1960s to the 1980s,” says current BAM/PFA Trustee Jack Wendler.  “As an active participant in the Conceptual art movement, I can say that there couldn’t be a better home for this collection than BAM/PFA.  It will be an inspiration to students and our other audiences for years to come.”

See Berkeley Art Museum Acquires the Steven Leiber Conceptual Art Collection and Library, Art Daily, Dec. 20, 2014.

December 20, 2014 in Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Pitfalls of IRA Trusts

IRAIRA trusts can have beneficial results, such as creditor protection, but are susceptible to some common pitfalls, which can cause acceleration of required minimum distributions and lessen the tax deferral benefits. Two main situations that can accelerate RMDs are missing the October 31 deadline for sending necessary paperwork to the IRA custodian, and including charitable bequests from an IRA trust that mistakenly results in the charity as the trust beneficiary. Succumbing to these common pitfalls can result in the attorney, CPA, CFP, or other financial planner involved being exposed to discipline and lawsuits.

See Seymour Goldberg, Dealing With Faulty IRA Trusts, Accounting Today, Dec. 17, 2014.

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

December 20, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, December 19, 2014

Imperial Sugar Money Missing

Imperial sugar

When the Imperial Sugar Refinery exploded in 2008, fourteen workers were killed and more than forty were injured.  Because of this devastating event, the children of the victims received money held in trust listed at $81,109.  However, an attorney for the families of the children notified Chatham County that the money is now missing through the actions of Probate Court clerk Kim Birge. 

In an ante litem letter, attorney Brent J. Savage wrote that the funds at issue were provided to the court to be held in trust “for the benefit of minor children who lost their fathers in the Imperial Sugar explosion” and “are currently unaccounted for.” 

Savage further wrote, “We believe that the county is responsible for the actions of the clerk of the Chatham County Probate Court and for the negligence of the judge of the Probate Court in its failure to properly monitor the actions of Kim Birge and for fiscal responsibility.”  The letter was sent to Chatham County Commission Chairman Al Scott, and County Attorney John Hart.  Savage is expected to seek damages for the lost funds, interest on those funds, and other general damages. 

See Jan Skutch, Money for Children of Imperial Sugar Victims Stolen By Fired Court Clerk, Attorney Says, Savannah Morning News, Dec. 19, 2014.

December 19, 2014 in Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Title Insurance Issues Triggered By Estate Planning Transfers

Title insurance

While estate planning attorneys frequently advise their clients about the advantages of transferring real property to irrevocable trusts or other estate planning vehicles, they may not consider the potentially calamitous title insurance implications of such transfers.  The original property owners may have had coverage under their policy, however, once the property is transferred to the estate planning entity, coverage could be lost since the entity is no longer insured.

The consequences of losing valid title insurance coverage can be significant.  Covered matters include unmarketability of title, defects, liens, encumbrances on the title, and the like.  

In Kwok v. Transnation Title Ins. Co. (2009) 170 Ca4th 1562, insureds found themselves in an easement dispute with their neighbors.  Although they may have had a valid claim under their title insurance policy, they had transferred title to their property from their limited liability company to an irrevocable trust.  The insureds ineffectively argued that the transfer only effected a change in the method of holding legal title, not a change in their proportional beneficial interest. The court held that "Under the terms of the policy, appellants could only become insureds by operation of law. The transfer of property by an insured into a family trust is a voluntary act and not one that arises by operation of law."

The steps an estate planning attorney can take to avoid this title insurance conundrum include asking the client for a copy of the title insurance policy to make sure it defines “insured” to include estate planning entities.  Also, if the policy has a narrower definition of insured, contact the title insurance company and obtain an Additional Insured endorsement. 

See Karen Turk, Dead Man “Kwoking”: Estate Planning Property Transfers Can Trigger Title Insurance Nightmares, JD Supra Business Advisor, Dec. 18, 2014.

December 19, 2014 in Estate Administration, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

The Importance of Consistent Estate Planning

Tax3An important lesson in coordinating all accounts and estate planning tools to match estate planning goals was illustrated in a recent Private Letter Ruling. A trust was created which named charities to receive donations from the trust. There was not enough funding for the charitable contributions, but the trust was named as a beneficiary of an IRA. A state court approved the taxpayer's petition to reform the trust so the funds from the IRA to the trust and then from the trust to the charities would be direct bequests from the IRA to the charities.

In  Private Letter Ruling (201438014), the court's grant of the reformation for the purpose of beneficial tax treatment was not allowed, and the IRA distribution to the Trust would be income. Additionally, the donations would not be deductible because gross income was not required under the trust terms to be used to make the donations.

See Joseph Tamburello, Coordinate Your IRA Beneficiary Designation With the Terms of Your Estate Plan, The National Law Review, Dec. 18, 2014.

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

December 19, 2014 in Estate Planning - Generally, Income Tax, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Using Annuities to Decrease Tax Consequences of IRAs

IRAThe use of annuities along with other retirement and estate planning tools can help reduce tax burdens by differing taxes. If required minimum distributions from an IRA are unneeded or unwanted, a deferred annuity can be purchased up to 25% of each IRA's assets of $125,000 total max to reduce required distributions and tax consequences. Additionally, heirs of the annuity can now maintain tax deferral even if they switch insurers through a 1035 exchange. Tax deferral may also be achieved for trust income through a variable annuity.

See Karen Hube, Annuity Novelties, Barron's, Nov. 29, 2014.

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

December 19, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, December 18, 2014

Trust Protectors

Trust1When a trustee is not enough to quell concerns over turning over control of assets through an irrevocable trust, a trust protector can help. Choosing a trusted person that can address changes in circumstances by altering trust terms and keep an eye on the trustee can calm concerns over how the trust assets will be handeled. The trust protector's role can be customized based on the oversight powers conferred.

See E. Hans Lundsten, Joseph Marion, III, David Riedel & Christina Scola, Will Your Estate Plan Benefit From a Trust Protector?, JD Supra, Dec. 10, 2014.

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

December 18, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 17, 2014

No Take Backs on Charitable Donations May Be Changing

RefundA combination of increased accessibility to online financial records at the click of mouse and recent litigation by donors demanding refunds from charities has created a rise in the number of charitable donations being requested to be returned if the donor becomes unhappy with where the funds are going. Donations to nonprofits have previously been controlled by contract law and donors were out of luck when requesting refunds, but on a state by state basis that is starting to change. In some states donors are gaining ground on having a right to request a refund on their donations, especially if it is to a charitable trust.

See Charlie Wells, When Unhappy Donors Want Their Money Back, The Wall Street Journal, Dec. 14, 2014.

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

December 17, 2014 in Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)