Wills, Trusts & Estates Prof Blog

CLE on Representing Estate and Trust Beneficiaries and Fiduciaries

The American Legal Institute will be hosting a CLE in Langham, Boston entitled, Representing Estate and Trust Beneficiaries and Fiduciaries, July 18-19, 2013.  A description of the CLE is below:

Why You Should Attend

Estate planners, litigators, and corporate fiduciary counsel all want to know what impact (if any) the American Taxpayer Relief Act of 2012 will have on their clients.

This advanced CLE course goes beyond basics and delves into topics that specifically affect beneficiaries and fiduciaries, while offering registrants solutions to their most pressing concerns through small roundtable discussions and networking opportunities.

Experienced planning chairs Steve Fast and Bob Whitman, and the rest of the nationally known faculty panel, provide two full days of knowledge, insight, and even a bit of humor as they update you on all the current law developments affecting beneficiaries and fiduciaries.

What You Will Learn

The go-to program for estate and trust administration professionals is back by popular demand! Get the latest insight on the issues, including strategies for addressing current challenges for unhappy beneficiaries and concerned fiduciaries. Expert faculty of seasoned practitioners from across the country will examine: 

• Emerging fiduciary issues and how to pick (or be picked as) the best lawyer for the job
• Hot topics in tax, ethics, and estate and trust administration
• What you don’t (but should!) know about income taxation of estates and trusts
• The current fiduciary litigation landscape—and what you should do differently
• Perils of the lawyer-trustee
• The emboldened beneficiary
• Deposition devils and details
• Decanting illusions
• “Side letters” to trustees
• The intersection of the prudent investor and business interests
• Failing facility – drawing the lines on diminished capacity
• Using taxes to settle disputes
• Ethics analysis (one hour)
• Your issues, one-on-one

Faculty will reserve time throughout the program to address your questions.

Registrants at the live program have the opportunity to take part in small, focused, and interactive discussions during breakfast.

UK Government Decides Not to Regulate Will Writing

The Legal Services Board protects the interests of consumers in the United Kingdom by overseeing legal regulations.  After a two year investigation, the Legal Services Board recommended that the Ministry of Justice regulate will writing after finding “people’s lives were being ‘seriously damaged’ by incompetence or misdemeanor when drafting wills.”

The Ministry of Justice agreed that there is room for improvement, but rejected the notion that regulations were the right solution.  Although the Government will explore other options to increase consumer confidence in will writing services, the risk of consumers being left with unsuitable wills with no recourse still remains.

See Samuel Dale, Govt Rejects Calls to Regulate Will Writing, Money Marketing, May 15, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

24th Annual Estate Planning and Probate Drafting Course

The State Bar of Texas is presenting the 24th Annual Estate Planning and Probate Drafting Course in Houston, TX on October 24-25, 2013.  The course provides 13 hours of MCLE credit, including 2 hours of ethics.  A description of the course is below:

Course Highlights

• Decanting panel
• Drafting for Trust Modifications and Private Letter Ruling Requests
• Pretrial Drafting for Will Contests, Guardianship Disputes and Fiduciary Litigation
• Drafting Fiduciary Powers for Trust Protectors and Independent Trustees
• Drafting for Marital Deduction Planning in 2013

Course Amenities

• Coffee and breakfast provided each morning
• Lunch provided both days
• Complimentary wireless Internet connection in the meeting room
• Convenient access to electrical connections - bring your laptop!
• Networking Social on Thursday night

For those that can’t make it to the live course, a video replay will be shown in Dallas, TX on November 21-22, 2013.

Article on Testamentary Restraints on Marriage

Ruth Sarah Lee (Harvard Law School, J.D. 2012) recently published an article entitled, Over My Dead Body: A New Approach to Testamentary Restraints on Marriage, 14 Marq. Elder's Advisor 55 (Fall 2012). below iProvided s the introduction to her article:

Money is a tool that can be wielded from the grave. The dead-hand may attempt to distribute money to shape the affairs, and influence the choices of the living. It is not uncommon to find deeds or wills that try to shape the behavior of the beneficiary by conditioning a grant, devise, or bequest on a potential beneficiary’s conduct. While not every conditional gift is designed to influence the beneficiary’s behavior, many are devised for that very purpose. Behind these gifts are different motives from different testators - whether it is a desire for control, benevolent paternalism, or even revenge. This article, specifically, turns to the problem of restraints on marriage. Testators (usually parents) write wills prohibiting, penalizing, or requiring marriage to one of a particular religious faith or ethnicity as an attempt to shape the beneficiary’s (usually the child’s) romantic decisions.

In addressing these restraints on marriage, many courts have taken a “reasonableness” approach. Even cases that do not explicitly take a “reasonableness” approach--but argue purely in terms of balancing public policy goals--tend to use language shaded with “reasonableness” rhetoric. A complete (total or general) restraint of marriage is a restraint that prohibits the beneficiary to benefit from the will if he marries anyone at any time. A partial restraint of marriage is, in contrast, limited in time or applicable to a specific class of persons.

However, the “reasonableness” approach has several serious shortcomings, and fundamentally focuses on the incorrect issue. The test suffers from at least four major problems: (1) it ostensibly questions the testator’s intent while ingenuously claiming that it does not; (2) it is empirically unsound; (3) it fails to take into account whether the restraint is actually consequential to the beneficiary; and (4) it produces unjustifiably inconsistent results based on geography and time.

Given these four problems with the “reasonableness” approach, a discussion and recommendation of a new approach is warranted. Thus, four principle alternative approaches are considered in this article: (1) a blanket prohibition of all marital restraints, most noticeably promulgated by Professor Jeffrey G. Sherman; (2) a blanket allowance of all marital restraints centered on the value of honoring testator intent; (3) a case-by-case balancing approach used by the court in In re Estate of Feinberg, 919 N.E.2d 888 (Ill. 2009)[hereinafter Feinberg II]; and (4) the possibility of pursuing a new test that does not suffer from the same shortcomings as the Reasonableness Test.

This article proposes a new test--the Coercion Test--as a possible alternative for courts to consider in handling testamentary restraints on marriage. If we are worried that the deed or will forces the donee to surrender to an “unreasonable” marriage or a life of loneliness, we should examine the extent to which the donee is actually influenced by the grant. In other words, instead of focusing on the donor’s “reasonableness”, courts should focus on the donee’s need. The donee’s need--the juxtaposition of his current financial position, how much he would stand to gain, and how much he needs the gain, with how much he would have received under intestacy--will show how much coercion or pressure the donee is actually experiencing from the will.

The discussion closes with a comparison between the proposed Coercion Test and the other alternative methods. The article concludes that the Coercion Test will maintain the advantages found in the other alternatives, while avoiding many of the disadvantages, and is therefore one of the most sensible approaches to marital restraints. The Coercion Test is a sensible approach because it avoids all four of the major problems with the Reasonableness Test, provides more respect for testator’s intent than a blanket prohibition, is more protective of public policy than a blanket allowance, and provides more consistent results than a case-by-case balancing approach. Most importantly, the Coercion Test addresses the crux of the public policy problem: whether an individual is being forced into, or out of, marriage.

Updating Estate Planning Documents

Often people will draft their documents and then forget about them, but this can be a bad idea and wreak havoc on your health and your family's wealth. 

Recently a Consumer Reports survey indicated the 86% of respondents who had wills or other estate documents had not updated them within the past five years. As circumstances change throughout the course of a lifetime, your documents should be updated accordingly. The Wall Street Journal lists the following key documents to evaluate for updates: 

• Wills
• Trusts
• Health-care directives
• Financial power of attorney

See Elizabeth O'Brien, Make Your Heirs Happy: Update Your Will, The Wall Street Journal, May 8, 2013. 

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

Tips To Help Achieve A Negative Tax Result

As the tax rules change financial, advisors are responsible for weighing the different tax implications of their advice. Recently, there has been a change of conventional thinking regarding trust strategy. It was believed that assets should be held in a bypass trust. The rational behind the bypass trust was to have the assets grow out of the estate. However, with higher capital gains taxes the opposite might be more accurate. Many people say that equities should be held in the spouse's name and bonds should be put in a bypass trust. However, the yield for bonds is flat and interest rates are rising. As a result, the increase in rates would have a negative impact on bonds.

In the current economy, many wealthy people have turned to fixed-income substitutes such as master limited partnerships in oil, or sovereign debt funds. A person with these substitutes might want to consider holding them in a bypass trust. Nonetheless, the trustee making this decision would still face challenges. Trustees owe a duty to all beneficiaries not just the spouse. Additionally, provisions in the will are not enough to offer a fiduciary only investing in these asset types.It will be up to the financial advisor to alleviate the negative income tax result. According to financial advisor Martin Shenkmen, any combination of the following might help with that goal:

1. Modify asset location decisions to favor investments generating cash flow in an individual client's name to cover income tax costs, or non-income-producing assets (such as growth stocks) in the trust, to lessen the income tax burdens added by the trust.
2. Favor tax-advantaged investments, such as tax-exempt bonds and insurance products inside the trust. If life insurance is to be used, be certain that the trust is suitable for holding the insurance since it may not have been designed with that purpose in mind.
3. Harvest gains and losses more aggressively and coordinate planning to reduce the income tax burden.

See Martin Shenkman, New Take on Trust Strategy, financialplanning.com, May 1, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Boris Berezovsky's Complicated Estate

Even though Boris Berezovsky, a Russian oligarch, drew up a new will nine days before his death, because his financial affairs are so complicated, it may still take years of litigation to settle them.

Berezovsky named five potential executors to administer his estate and none of the listed individuals wanted to take on the job, so accountants Grant Thornton are now in charge of administering the estate. 

His will names the following individuals as beneficiaries: his daughter, his estranged partner, two private lawyers and a friend.

Sources are divided over whether there is anything in the estate left to divide between remaining companies that may have a potential claim on his estate.

See Tom Harper, Executors for Boris Berezovsky 'unwilling to oversee estate,' London Evening Standard, May 8, 2013. 

Court Seeks To Remove A Fiduciary Suspected of Evidence Tampering

In Connecticut, a probate judge wants to remove Candace Bednarz from being the fiduciary in her murdered mother’s estate. The court has already ruled payments to creditors are the only distributions to be made out of the estate. The judge recently found out that Bednarz was arrested by police her for tampering with evidence in her mothers murder prosecution. Brett Bednarz, Candace’s brother, has pending charges against him for killing his mother, Beverly Therrien.

Therrien’s most recent will has not been found and her 2006 will was deemed invalid. As a result, state law specified her children as her heirs. The 2006 will cut Candace Bednarz from receiving any estate assets. However, Candace Bednarz petitioned the court to control the estate's assets claiming the entire estate only held $35,000 dollars. According to her arrest warrant, she has withdrawn well over $90,000 dollars in cash. 

See David Owens, East Hartford Probate Judge Seeks To Remove Candace Bednarz From Contorl Of Mother's Estate, Courant.com, Apr. 30, 2013.

Capacity for Lifetime and Estate Planning

Clients that speak to estate planning attorneys often receive a "package" of estate planning documents, including a will, a trust, a health care proxy, a durable power of attorney, and an advance directive. However, many attorneys fail to grasp the fact that these documents require different levels of capacity to ensure their validity or they choose to ignore the distinctions. One possible solution to this to have a uniform test for capacity when attorneys draft a package for their clients.

See Robert Whitman, Capacity For Lifetime and Estate Planning, 117 Penn St. L. Rev. 1061 (2013).

Special thanks to Katherine Pearson (Professor of Law, Penn State University - The Dickinson School of Law) for bringing this article to my attention.

State of New York To Escheat $40 Million From An Estate

Of the 2.5 million people who died intestate in 2012 one of them was real estate developer Roman Blum, whose estate "was worth almost $40 million when he passed away in January 2012 at the age of 97." The state conducted a worldwide search for his heirs but the search turned up to no living relatives. If no relatives come forward in the next three years, all the money in his estate will escheat to the State of New York. There are several estate planning lessons that emerge from Blum's estate:

1. A person might want to provide for their loved ones not just their relatives. There must have been people who Blum cared about and a will would have given him the opportunity to bequeath property to them. Unfortunately, without a will or trust there is no way to legally enforce Blum's wishes. If a person dies without a will, the state follows its intestacy statute to determine who should receive Blum's estate.
2. A person might want to review his or her beneficiary forms to ensure his or her primary and secondary designations are correct and up to date.
3. Furthermore, assuming Blum did not want to benefit anyone, he still might have wanted to benefit a charity. If Blum had written a will, he could have donated his estate to a worthy cause.
4. Estate planning documents are not only for the benefit of our family members and loved ones after our deaths, they can also be necessary to safeguard our wishes during medical hardships in our life. Advance directives, which allow a person to express their wishes about end-of-life care, and health care proxies, which allow a person to designate a person to make medical decisions on a person's behalf if the person cannot, are both necessary estate planning documents.
5. Additionally, a person who creates estate planning documents might want to make their documents accessible so that family members or the executor of the estate knows where to find them. 
6. Finally, it is important to not procrastinate about making these important documents.

See Deborah L. Jacobs, N.Y. State Could Get $40 Million From Man Who Died Without A Will, Forbes, Apr. 28, 2013.

Thandi Maqubela Cross-Examined During Her Murder Trial

On April 18th, the cross-examination of Thandi Maqubela ended in the Western Cape Town High Court in South Africa.

Thandi Maqubela has pleaded not guilty to the alleged murder of her husband, acting judge Patrick Maqubela.  She and business associate Vela Mabena allegedly suffocated the judge with plastic cling-wrap in June 2009.

Thandi is also charged with fraud for allegedly forging her husband’s signature on a will naming her the main beneficiary.  She told the court she found the will in a carton months after her husband’s death, but the prosecutor claims the judge died intestate.  The estate is worth around 20 million South African Rands.

See Maqubela’s Cross-examination Ends, Times Live, Apr. 18, 2013.

Estate Planning for Digital Assets

I have just posted a revised version of my article, Estate Planning in the Digital Age.  The revision covers the additional states that have enacted or or considering enacting digital asset legislation relevant to estate planning.  The article also expands on planning suggestions and contains a comprehensive form for use in preparing an inventory of digital assets.

New Case: Manary v. Anderson

A Washington “superwill” revokes a nonprobate arrangement by referring to the asset.  Under Washington law, the owner of a nonprobate asset may dispose of that asset by will, thus revoking the nonprobate arrangement, by specifically referring to the asset in the owner’s will.  In Manary v. Anderson, the Supreme Court of Washington State held that the settlor and trustee of a revocable trust who retained the right to manage and live on real property transferred to the trust was an owner for purposes of the statute, that the real property was a nonprobate asset under the statute, and that the owner revoked the trust with regard to the real property by specifically devising the real property in the owner’s will; the statute does not require the testator to refer to the specific will substitute.

See Manary v. Anderson, 292 P.3d 96 (Wash. 2013).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

John duPont Estate Sold For Record Prices

John duPont lived an interesting life and accumulated an interesting number of personal effects. So much so that portions of his estate are still appearing at auctions across the globe and earning a ridiculously large amount of wealth. For example, a British collector purchased his valuable stamp collection for $200,000. This is only one example. According to Delaware Online, "[m]ore of his estimated half-billion-dollar estate will continue to go on the market."

DuPont life ended on tail end of tragedy. In the late 1990s, duPont was found guilty but mentally ill for the murder of Olympic gold medal winner, David Schultz. He was sentenced to 30 years in prison. He recently died in prison at the age of 72. The jury's finding resulted in several court challenges to duPont's mental competency to sign the last changed will that he wrote. Among the parties challenging his will are "DuPont family members, the Delaware Museum of Natural History, two wrestlers and coaches have been among the plaintiffs in a barrage of law suits contesting the will." His will passed most of his estate to his wife and a Bulgarian wrestler. He also left some to attorney who also served as the executor of his estate.

See Harry F. Themal, More John duPont Estate Sold At Record Prices, Delaware Online, Apr. 21, 2013.

Pennsylvania's Orphan's Court Rules Likely To Bring Changes

The Supreme Court's Orphans' Court Procedural Rules Committee is currently seeking suggestions from attorneys, judges, and even the public on how they should change the 40-year-old orphan procedural rules of their orphans' courts. The deadline is June 13, 2013. Once all of comments are considered, the committee will finalize them and submit the rules for adoption by the Supreme Court of Pennsylvania. If the Supreme Court adopts the rules, then the rules will take effect. This will happen sometime after the court accepts the rules.

The proposed rules will cover Rules 1.1 through 14.5, and cover procedures for "the filing and audit of Accounts, procedures for Orphans' Court matters raised by citation and petition, pre-hearing and post-hearing dispositions, and rules for practice before the Registers of Wills." In other cases, there will be no substantive changes to the rules, only structure changes to the locations of the rules. The new rules are likely to include Explanatory Comments, which will hopefully better explain some of the rules. This proposal has not been submitted to the Supreme Court of Pennsylvania at this time and is the accumulation of 5 years of work.

See Neil E. Hendershot, PA Orphans' Court Rules Proposed for Sweeping Changes, PA Elder, Estate & Fiduciary Law Blog, Apr. 4, 2013.

New Case: In re Estate of Haviland

In In re Estate of Haviland, disqualification of abuser as beneficiary is not retroactive.  In 2009, the Washington State legislature amended the state’s slayer statute to disqualify from acquiring property from a decedent any person who financially abused the decedent if the decedent was a vulnerable adult.  The decedent died before the enactment of the statute but the contest over his will was in progress at the time of enactment.  After conclusion of the contest, the personal representative filed a petition to disqualify the decedent’s widow as an abuser.  The trial court denied the petition, finding that the “triggering event” for application of the statute was abuse occurring during the decedent’s life. The intermediate appellate court reversed, finding that the triggering event was the filing of the petition for disqualification and the Supreme Court of Washington affirmed.  The court explained that the triggering event is the abuser’s attempt to receive property and that vested rights are not impaired because the abuser’s rights to the decedent’s probate property vest only when probate is complete. 

See In re Estate of Haviland, No. 86412–8, 2013 WL 992042 (Wash. Mar. 13, 2013).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

New Jersey Man Defrauds Dying Woman by Posing as Nephew

James J. Demitro, a 43-year-old man from Matawan, New Jersey, admitted to stealing about $1 million dollars and the family home of a terminal cancer patient with dementia. 

Demitro defrauded the 87-year-old Red Bank woman by posing as her nephew and hiring attorneys to draft a will naming him executor and full beneficiary of her estate.  Demitro also had attorneys transfer the deed of the woman’s home to himself for $1.  He was arrested with over $600,000 found in his bank accounts and a $150,000 Ferrari Spyder in his possession.  Under the terms of his plea agreement, Demitro now faces eight years in prison for attempted impersonation and theft by deception.

See Rob Spahr, Matawan Man Admits to Stealing $1M, House from Dying Woman with Dementia, www.nj.com, Apr. 12, 2013.

The Interface Between Elder Law and Digital Asset Planning

Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law) and Naomi Cahn (Harold H. Greene Professor of Law, George Washington University Law School) have recently posted on SSRN their article entitled Digital Planning: The Future of Elder Law, 9 NAELA J. 135 (2013).

Here is the abstract of their article:

More than half of individuals over the age of 65 use the Internet or e-mail — and they are a fast-growing population on the Internet. Like most people, however, they have probably not considered how to dispose of their digital life if they become incapacitated or when they die, even though they are in the most likely age group to have drafted a will. Indeed, even if they do engage in planning, they cannot be confident that their wishes will be carried out: only a few states have laws covering probate and digital assets, there is no generally accepted method for using wills or trusts to dispose of digital assets, and the policies of Internet providers often preclude the exercise of individual autonomy. As Internet usage becomes even more pervasive and as online assets and accounts have the potential to become even more valuable (emotionally and financially), issues involving control of digital property are rapidly becoming even more important.

This article first explains digital assets as a new species of property and discusses the importance of planning for these assets. The article next analyzes the legal context for digital asset disposition, including the few existing state laws, and then turns its attention to the future, including suggestions for planning and commentary on where the law might be headed. Notwithstanding the legal uncertainties surrounding digital asset disposition, individuals should make plans for the management, ownership, or destruction of these assets based on the foundational principles of deference to the individual’s intent. Acknowledging the difficulty of predicting the future, the authors feel quite confident that, as Elder Law moves forward, planning for a client’s digital assets will assume an increasingly important role.

Article on Mason Lee's Will and Testamentary Capacity

Ernest Rigney (Associate Professor, College of Charleston) recently published an article entitled, The Contentious Will of Mason Lee: A Clarification of South Carolina's Leading Case Regarding Testamentary Capacity, 20 J.S. Legal Hist. 61 (2012). Provided below is the introduction to his article:

Near the small town of Bristow, South Carolina, several yards from the intersection of S.C. Highway 38 and Gray Road, stands an isolated historical marker erected in 1975 by the Marlboro County Historical Preservation Commission. It is doubtful that many South Carolinians are familiar with the person or event commemorated by this historical marker; to wit, Mason Lee (1770-1821) or his contested last will and testament, which also left its mark on South Carolina probate case law. Fortunately, the inscriptions on the front and back of the marker offer, in addition to brief descriptions of Lee and his contested will, an explanation of the enduring legal significance of the will contest’s outcome.

One side of the marker identifies Lee as “a wealthy Pee Dee planter known for his eccentricities.” A brief sampling of Lee’s eccentric beliefs is then provided: “He believed all women were witches .... He felt [his relatives] used supernatural agents to bewitch him and went to great extremes to avoid these supposed powers.”

The other side of the marker continues the story by noting that Lee, because of his eccentric beliefs, prepared a will that bequeathed and devised his entire estate not to his surviving heirs, but to the states of South Carolina and Tennessee. The heirs challenged the validity of the will claiming Lee was not legally competent at the time he executed his will. An appellate court’s ruling in 1827 upheld the lower court’s verdict in favor of the will. As a consequence, the will contest became “the leading case in South Carolina regarding mental capacity in the execution of a will.” 

This unusual historical marker is certainly not an exhaustive chronicle of Mason Lee’s life or the legal proceedings surrounding his controversial will. In fact, the information it contains about Lee’s eccentricities was extrapolated from testimony proffered by witnesses challenging the validity of Lee’s will; it was these same contestants who lost their case both at trial and on appeal. Solely relying on information culled from the contestants’ case is not a problem unique to the Marlboro County Historical Preservation Commission. Most accounts of Lee’s case tend to devote a disproportionate amount of attention to the contestants’ case. Why should the losing party’s characterizations of Lee’s beliefs and actions be treated as unbiased and factual biographical data? An overemphasis on the contestants’ case combined with an insufficient emphasis on the proponents’ case renders the trial court’s verdict both suspect and ridiculous. Subsequently, the appellate court’s decision to uphold the will appears equally questionable and inadequate. This imbalanced yet prevalent approach to Lee’s case strongly suggests that a verdict handed down by law triumphed over what justice and common sense required--a decision against Lee’s putative will. Was Lee’s victory a lawful but unjust outcome? Until this question is adequately addressed, it will remain an open and unsettling query.

The following sections address the aforementioned question in two interrelated ways. First, by reexamining the available historical and biographical materials associated with Mason Lee, his relatives, and the contest over his will, a more substantial account of these people and events will be possible. Second, by fully describing the successful strategy used by the proponents, the myth of Mason Lee as an incompetent testator who circumvented justice will be debunked.

New Case: Stephenson v. Spiegle

In Stephenson v. Spiegle, rescission of pay on death designation is appropriate even without wrongdoing by the pay on death payee.  After executing a will giving his estate to various family members, outright and in trust, the testator opened a payable on death account at a local bank naming his attorney as the beneficiary.  At the testator’s death, the account held approximately one-third his entire estate.  The trial court ordered that the attorney return the funds to the estate, finding that the testator’s unilateral mistake in naming the beneficiary entitled the estate to the remedy of rescission.  The intermediate appellate court affirmed, finding that the evidence supported the finding that the testator mistakenly believed that naming his attorney as beneficiary would result in the funds passing under the will and that rescission was appropriate even in the absence of evidence of any wrongdoing by the attorney. 

See Stephenson v. Spiegle, 58 A.3d 1228 (N.J. Super. Ct. App. Div. 2013).