Wills, Trusts & Estates Prof Blog

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

Tuesday, September 27, 2016

Article on Beneficiaries Modifying Irrevocable Trusts

Irrevocable trustBradley E.S. Fogel recently published an Article entitled, Terminating or Modifying Irrevocable Trusts by Consent of the Beneficiaries – A Proposal to Respect the Primacy of the Settlor’s Intent, 50 Real Prop. Tr. & Est. L.J. 337 (2016). Provided below is an abstract of the Article:

In most states, an otherwise irrevocable trust may be terminated or modified by all of the beneficiaries as long as the trust does not have an unfulfilled material purpose. With few exceptions, however, a settlor of a trust is allowed to put whatever conditions she likes on her largesse. The beneficiaries might dislike the trust terms or wish they were different, but they are merely looking a gift horse in the mouth. After all, it was the settlor's choice to make the gift in the first place. The wants of the beneficiaries are only relevant to the extent that the settlor decided to make them relevant. Thus, trust termination by consent of the beneficiaries is inapposite in American trust law.

Trust modification or termination by consent of the beneficiaries should be abandoned in favor of the doctrine of equitable deviation. Equitable deviation allows trust modification (or even termination) based on circumstances not anticipated by the settlor. Such changes are made to better effect the settlor's intent. Equitable deviation respects the primacy of the settlor's intent and recognizes that, due to unanticipated circumstances, trust modification or termination may improve the trust's efficacy in effecting that intent.


September 27, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, September 25, 2016

Drafting a Bulletproof Will

Bulletproof willWith the potential of dissatisfied heirs and will contests, it is important to make your will bulletproof. One thing you can draft in your will is a no-contest clause, which discourages people from disputing your will, especially beneficiaries. Also, if you plan on doing something dramatic with your bequests, announce these wishes to your loved ones while you are still alive, giving clarity to those who might feel blindsided otherwise. Along those same lines, you should have a doctor verify your mental health at the time you plan to draft your will. Additionally, if you do not want your will to become public record in the probate process, you should consider a living trust, which can satisfy your asset transfer without inviting unwanted attention and further challenges. 

See Alex Glenn, 5 Ways to Make a Bulletproof Will, USA Today, September 24, 2016. 

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


September 25, 2016 in Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Friday, September 23, 2016

Stranger Originated Life Insurance Withstands Challenge

STOLIStranger-originated life insurance (STOLI) is a scheme where someone purchases life insurance on the life of someone that they do not have an insurable interest on. One specific variant of this scheme sees the insured setting up a trust and owning the policy for a period of time while the premiums are paid for by a third-party lender. After a few years, the policy is sold to the lender with a substantial payment to the person on who the insurance was taken out. Now, STOLI arrangements are illegal in most states.

In Wells Fargo Bank v. Pruco Life Insurance Company, the court dealt with a policy that was issued pursuant to a STOLI arrangement. Florida law requires that an insurance company contest a life insurance policy within two years. The particular STOLI policy the court dealt with was contested after the two-year period. Accordingly, the question for the court was whether an illegal policy could nevertheless not be challenged after the two-year window. Ultimately, the court upheld the validity of the law, disallowing the insurance company to contest the policy after the two-year statute of limitations.  

See Jeffrey Skatoff, Stranger Originated Life Insurance Survives Challenge in Florida, Florida Probate Lawyers, September 22, 2016. 


September 23, 2016 in Elder Law, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Thursday, September 22, 2016

How Delaware Benefits Trusts

DelawareDelaware has long-been known as a jurisdiction that benefits the grantors of trusts. Specifically, Delaware has built a trust-friendly body of legislation and supported these laws with an effective court structure. Another benefit allows trusts established in Delaware to be free from state income tax if the trust beneficiaries are not state residents. This is especially valuable for those who anticipate large taxable transactions through trust assets, like the sale of a business.   

See Mark Gudaitis, What Does Delaware Have to Do with Estate Planning?, Atlantic Trust Blog, September 14, 2016. 

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


September 22, 2016 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, September 21, 2016

Federal Court Uses Princess Lida Doctrine to Dismiss Trust Dispute

Court houseA new federal case with reliance on the Princess Lida doctrine dismisses a federal trust dispute whilst a pending trust dispute resides in state court. In Genovese v. Genovese, the decedent created a testamentary trust for his two children, one of which was a plaintiff for this case. The trust named the decedent’s father as trustee. After various disputes, the plaintiff filed suit in federal court against the trustee, bringing four counts. The defendants moved to dismiss the first two counts, arguing that because the state court had already taken jurisdiction over the trusts, the federal court could not subsequently take concurrent jurisdiction over those same trusts. The Princess Lida doctrine supports this argument by preventing a federal court from taking such jurisdiction. The rule, however, only applies if the federal action is in rem versus in personam. Accordingly, the court ended up dismissing both counts; however, count II was dismissed for other reasons based on an in personam contract, which restricts the Princess Lida doctrine. 

See Jeffrey Skatoff, Federal Court Dismisses Trust Dispute with Pending State Court Trust Dispute, Florida Probate Lawyers, September 19, 2016. 


September 21, 2016 in Current Events, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Newest Edition of Contemporary Trusts and Estates

Trusts and estatesSusan N. Gary, Jerome Borison, Naomi R. Cahn, & Paula A. Monopoli’s newest edition of Contemporary Trusts and Estates, Third Edition will be available for Spring 2017 classes. Provided below is a summary of the book:

This third edition casebook captures the rapid evolution of doctrine in trusts and estates law that has occurred over the past half-century in response to profound societal and demographic changes. Influenced by recent developments in legal education, this casebook integrates legal analysis, judgment and perspective, ethics, and practice skills. It focuses simultaneously on the theoretical foundations and practical applications of the material, teaching students by using traditional case analysis, and innovative exercises. 

Professors and students will benefit from: 

  • Reorganized coverage of Wills before Trusts, beginning with an overview of the familial relationships at the core of all trusts and estates.
  • Extensive textual explanations that present the law and its many nuances. 
  • The inclusion of practice skills and exercises in response to recent ABA requirements.
  • Fact-based problems that required students to explore cases, the UPC, UTC, and other statutes, as well as the MRPC, in depth.
  • Document drafting, role-playing, and letter-writing-to-clients exercises. 
  • Numerous updates including:  Post-Obergefell v. Hodges developments for same-sex families, additional material on decanting and the new Uniform Trust Decanting Act, inclusion of the Uniform Powers of Appointment Act, discussion of planning for digital assets, and the Incorporation of 2016 ACTEC Commentary on the Model Rules.

September 21, 2016 in Books, Books - For Practitioners, Books - For the Classroom, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Article on Nonprobate Transfers Subject to Spousal Elective Share

Spousal elective shareLucy L. Holifield recently published an Article entitled, Property Law—Upending the Familiar Tools of Estate Planning: Equity Renders Revocable Trusts Subject to the Arkansas Spousal Election. In re Estate of Thompson, 2014 Ark. 237, 434 S.W.3d 877, 38 U. Ark. Little Rock L. Rev. 75 (2015). Provided below is a summary of the Article:

Thompson has launched Arkansas probate law into a gray zone of uncertainty. Before, nonprobate transfers were simply not subject to the elective share. Now, nonprobate transfers may be subject to the elective share if the court thinks it reasonable to do so under the totality of the circumstances. Although the Thompson court articulates an intent-based test and applies the holding narrowly to revocable trusts, the decision was actually made on the equities of the case. In these cases, “fraudulent intent” is simply a post-hoc label assigned to an equitable outcome. The factors used are primarily objective, and a synthesis of case law from the jurisdictions cited in Thompson sheds significant light on what sorts of circumstances may lead the court to a finding of fraudulent intent.

Part II of this note will begin by discussing nonprobate transfers, the history of the spousal elective share, and efforts to protect against spousal disinheritance that occurs as a result of nonprobate transfers; it will end with a discussion of Arkansas's approach to the problem debuted in Thompson. Part III will provide an in-depth analysis of factors used in other jurisdictions to determine whether a nonprobate transfer is subject to the spousal elective share. Although this section will provide some guidance, it will also demonstrate just how malleable the Thompson court's intent-based analysis is and how unpredictable Arkansas's estate planning realm is left as a result. Part III will end by offering a practical solution in the form of nuptial agreements, and Part IV will conclude the note.

September 21, 2016 in Articles, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 20, 2016

Article on Writing a Definitive Pet Trust

Pet trust beyerRachel Hirschfeld recently published an Article entitled, The Perfect Pet Trust: Saving Your Dog from the Unexpected, 9 Alb. Gov’t L. Rev. 107 (2016). Provided below is a summary of the Article:

This article is about pet trusts, the legal documents that secure an animal's uninterrupted care. The goal is to guide the reader through the process of writing a definitive pet trust, and to highlight the potential mistakes and pitfalls that could invalidate these documents.

What is a pet trust? A pet trust allows an individual, the Pet Owner, to name a Pet Guardian and, if they wish, to leave funds providing for the continued maintenance of animals, in the event that the Pet Owner is unable to.

The American Pet Products Association (“APPA”) estimates that about sixty-two percent of U.S. households have pets, and an astounding $60.59 million dollars will be spent on pets in the United States in 2015. This is three times the amount of money that was spent on pets approximately twenty years ago.

Clearly, times have changed and attitudes are evolving. An ever growing number of Americans consider their pets as more than just animals. According to The Harris Poll, there is a tendency for people to elevate their pets to the status equivalent to that of a family member. Just look at any Pet Owner's smartphone and you will see photos of their pets, along with other family members.

Because people are passionate about their pets, providing uninterrupted care for them is often a concern. When something happens to a Pet Owner, such as an accident, illness, or death, a pet trust becomes especially critical.

Sadly, if there is no legal document or binding plan in place, the court may make decisions for what it terms the abandoned animal.

September 20, 2016 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, September 18, 2016

Article on Fiduciary Services & Private Donative Trusts

Donative trustAdam S. Hofri-Winogradow recently published an Article entitled, The Demand for Fiduciary Services: Evidence from the Market in Private Donative Trusts, Hastings L.J. (Forthcoming). Provided below is an abstract of the Article:

Recent revelations on the use of fiduciary services by the wealthy and political leaders raise concerns regarding the use of such services for tax and creditor evasion. Yet given the secrecy shrouding much of the fiduciary industry, we do not know which fiduciary services are used for such purposes and to what extent. Shining a light on a particularly obscure part of the industry, this Article presents and analyzes the results of the first-ever global survey of professional service providers to private donative trusts and a series of interviews with professional trust service providers in five countries. I report new and unprecedented data on four controversial features of current trust practice: perpetual and extreme-long-term trusts, trust terms exonerating trustees from liability to beneficiaries, tools rendering beneficiaries' entitlements inaccessible to their creditors and the control of trusts by their creators. I found that trusts drafted to subsist for more than a century are fairly common, especially offshore, but many such trusts are not in fact likely to survive that long. Trustee exculpatory terms are now standard in donative trusts serviced by professionals, with most settlors neither demanding nor receiving any quid-pro-quo for their inclusion. Anti-creditor techniques protecting beneficiaries' entitlements are even more ubiquitous than trustee exculpatory terms, particularly so in trusts serviced by U.S.-resident providers. Many protected beneficiaries are not less able than the average person to take care of their financial affairs. Finally, express reservation of powers by trust settlors is a majority phenomenon in the U.S., but a minority one elsewhere. The actual control of trusts by their settlors is likewise far more common in the U.S. than elsewhere. I conclude the Article with recommendations for law reform making trusts likelier to benefit their beneficiaries and less likely to avoid duties owed to creditors and the taxpaying public.

September 18, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on 'Piercing of the Veneer' of a Trust in Divorce Proceedings

Divorce assetsAnton Van der Linde recently published an Article entitled, Whether Trust Assets Form Part of the Joint Estate of Parties Married in Community of Property: Comments on ‘Piercing of the Veneer’ of a Trust in Divorce Proceedings – WT v. KT, 79 J. Contemporary Roman-Dutch L. 165–73 (2016). Provided below is an abstract of the Article:

In WT v. KT the Supreme Court of Appeal has limited (and to some extent excluded) “piercing of the veneer of a trust” as remedy in divorce proceedings. The question was whether or not assets of a discretionary family trust created before the parties got married could be regarded as part of the assets of the joint estate of parties married in community of property. The order by the court a quo that the joint estate included the assets of the trust and that they were in fact the husband’s personal assets (and accordingly formed part of the joint estate) was overruled and set aside on appeal.

September 18, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)