Wills, Trusts & Estates Prof Blog

Skills Training For Estate Planners

ALI-ABA and the ABA Section of Real Property, Probate & Trust Law are cosponsoring the Skills Training for Estate Planners course at the Emory University School of Law from June 26 through July 1, 2006.  The planning chair is Prof. Jeffrey N. Pennell of Emory.

The program contains "[s]kills training ("lab work") that integrates substantive law with the practical skills required for estate planning.  Learn the fundamentals of drafting wills and trusts, experience feedback from noted authorities, and familiarize yourself with common issues presented in any estate planning practice."

Follow this link to view extensive details about the program.

Anna Nicole Smith Views Oral Arguments

As reported earlier on this blog, the United States Supreme Court granted cert in Marshall v. Marshall, 04-1544, to determine when federal courts may hear claims that are also involved in state probate proceedings. Oral arguments are set for today, February 28, 2006.

Anna Nicole Smith herself viewed the arguments.  She dressed in all black, did not sign autographs, and did not speak with reporters as she entered the court.

Anna Nicole has a surprising supporter -- the administration of President Bush which believes that the Court should allow federal courts to have superior jurisdiction in such cases.

See Manuel Balce Ceneta, Supreme Court to hear Anna Nichole Smith's case, USA Today, Feb. 28, 2006.

South Dakota Approves Pet Trust Legislation

On February 21, 2006, the governor of South Dakota approved legislation authorizing pet trusts which is based on Uniform Probate Code § 2-907.  Here is the text of this legislation:

    1.  Subject to the provisions of section 3 of this Act, a trust may be performed by the trustee for twenty-one years but no longer, whether or not the terms of the trust contemplate a longer duration if the trust is for a specific lawful noncharitable purpose or for lawful noncharitable purposes to be selected by the trustee.
   

    2.  Subject to the provisions of section 3 of this Act, a trust for the care of a designated animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument shall be liberally construed to bring the transfer within this section, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor's intent.

   

    3.  Any trust provided for by sections 1 and 2 of this Act is subject to the following provisions:
            (1)    Except as expressly provided otherwise in the trust instrument, no portion of the principal or income may be converted to the use of the trustee or to any use other than for the trust's purposes or for the benefit of a covered animal;

            (2)    Upon termination, the trustee shall transfer the unexpended trust property in the following order:

                        (a)    As directed in the trust instrument;

                        (b)    If the trust was created in a nonresiduary clause in the transferor's will or in a codicil to the transferor's will, then under the residuary clause in the transferor's will; and

                        (c)    If no beneficiary results from the application of subsection (a) or (b) of this subdivision, then to the transferor's heirs under 29A-2-711;

            (3)    For the purposes of § 29A-2-707, the residuary clause is treated as creating a future interest under the terms of a trust;

            (4)    The intended use of the principal or income may be enforced by a person designated for that purpose in the trust instrument or, if none, by an individual appointed by a court upon application to it by that person;

            (5)    Except as ordered by the court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment, or fee is required by reason of the existence of the fiduciary relationship of the trustee;

            (6)    A court may reasonably reduce the amount of the property transferred if it determines that that amount substantially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property under subdivision (2) of this section;

            (7)    If no trustee is designated or no designated trustee is willing or able to serve, a court shall name a trustee. A court may order the transfer of the property to another trustee if required to ensure that the intended use is carried out and if no successor trustee is designated in the trust instrument or if no designated successor trustee agrees to serve or is able to serve. A court may also make such other orders and determinations as are advisable to carry out the intent of the transferor and the purpose of this Act.

   

    4.  Nothing in this Act may be construed to reinstate the rule against perpetuities in South Dakota as to any trust except trusts specifically defined in this Act as honorary trusts or trusts for the care of specific animals.

Special thanks to the Hounded, Cowed, and Badgered Blog for bringing this new statute to my attention.
    

Follow this link for a comprehensive list of pet trust legislation.

Tomorrow is Big Day for Anna Nicole Smith

As reported earlier on this blog, United States Supreme Court granted cert in Marshall v. Marshall, 04-1544, to determine when federal courts may hear claims that are also involved in state probate proceedings.

Oral arguments are scheduled to take place tomorrow (February 28, 2006).

Tax Apportionment & Mississippi

The Mississippi estate tax apportionment statute apportions taxes against “all persons interested in the estate” which includes donees of inter vivos gifts “included in the decedent’s taxable estate.”

The decedent’s will apportioned taxes against each bequest and directed that adjusted taxable gifts be treated as bequests for apportionment purposes.  The donee of large inter vivos taxable gifts not included in the taxable estate resisted payment of the tax.

The court in In re Estate of Necaise, 915 So. 2d 449 (Miss. 2005), held that the donee was a person interested in the estate and that the will’s apportionment provision must be enforced.

Special thanks to Rita and Joseph Solomon Prof. William P. LaPiana of the New York Law School for contributing this case.

Top SSRN Downloads

The top SSRN Journal of Wills, Trusts, & Estates Law downloads for papers announced in the past 60 days from December 27, 2005 to February 25, 2006 were as follows:

Rank	Downloads	Paper Title
1	36	A Prudential Exercise: Abstention and the Probate Exception to Federal Diversity Jurisdiction Christian J. Grostic, University of Michigan, Date posted to database: October 27, 2005 Last Revised: January 18, 2006
2	36	Book Review: A Romantic Conception of Fiduciary Obligation Robert Flannigan, University of Saskatchewan, Date posted to database: December 14, 2005 Last Revised: December 15, 2005

Trustees & Fiduciary Duties

Prof. Melanie B. Leslie (Cardozo Law School) has recently published her article entitled Trusting Trustees: Fiduciary Duties and the Limits of Default Rules, 94 Geo. L.J. 67 (2005).

Here is the summary of her article as posted on SSRN:

In steadily increasing numbers, trust scholars are embracing the view that fiduciary duties are mere default rules, freely waivable by the parties to the trust document. This view parallels the default rule model developed in corporate law by Frank Easterbrook and Daniel Fischel, who have argued that fiduciary duties are "contract" terms that shareholders and management would have agreed to had they anticipated agency cost problems. Management, they argue, should be free to modify, or even eliminate, fiduciary duties in the corporate charter.

This movement by trust scholars to transplant corporate concepts into the law of trusts is has reached its apotheosis in the latest article by John Langbein, who seeks to replace the trust law duty of loyalty with the less stringent corporate standard. See John Langbein, Questioning The Trust Law Duty of Loyalty: Sole Interest or Best Interest? 114 Yale L. J. (2005) (his Yale article cites a draft version of this piece). The analogy to corporate law, however, is fundamentally misguided. Market forces, which (arguably) act to discipline corporate fiduciaries, impose no significant constraints on trustees. Information asymmetries between trust settlors and professional trustees make it unlikely that certain types of express waivers incorporated in trust documents reflect a settlor's judgment that the provision would be value maximizing. Perhaps most importantly, fiduciary duties are most effective when they function both as legal rules and moral norms. Labeling fiduciary duties "default rules" strips them of their normative content, which ultimately undermines fiduciary law's ability to support and reinforce efficient social norms.

This article develops a theoretical framework for determining whether and to what extent parties to a trust document should be permitted to modify fiduciary duties. This framework reveals that recent statutes and provisions of the newly promulgated Uniform Trust Code (UTC), which are premised on the default rule model, are detrimental to trust settlors and beneficiaries. Particular problems are provisions that exculpate trustees from liability for breach of the duty of care, and that allow institutional trustees to engage in a wide range of formerly prohibited self-dealing transactions.

The Interesting Case of Boone Pickens' Charitable Gift

On December 30, 2005, billionaire Boone Pickens made a $165 million gift to a charity to establish a golf program at Oklahoma State University.  In part, Mr. Pickens took this action to take advantage of a special charitable gift tax deduction provided in Hurricane Katrina relief legislation (that is, he could deduct a charitable gift equal to 100% of his adjusted gross income rather than the normal 50% limit; in addition, he can carry the deduction forward for three years if necessary to offset income).

The $165 million spent less than one hour in the charity's account before being invested in a hedge fund, BP Capital Management.  The twist is that Mr. Pickens controls this fund.  It appears, however, that despite the conflict of interest, there was no violation of federal law.

For more information, see Stephanie Strom, Billionaire Gives a Big Gift but Still Gets to Invest It, NY Times, Feb. 24, 2006.

Family Limited Partnerships and the Estate Tax

Reed W. Easton (Seton Hall University School of Businsess) has recently published his article Court Again Considers Estate Tax Implications of an FLP, 75 Prac. Tax. Strat. 152 (Sept. 2005).  Here is the abstract of the article as posted on SSRN:

The Fifth Circuit in Strangi III upholds the Service's use of Section 2036(a)(1) to attack Family Limited Partnerships ("FLPs") as valuation discount vehicles, but leaves open the question of whether Section 2036(a)(2) may also be used. The prior decision in the Strangi series (Strangi II) overshadowed all former decisions in its expansive interpretation of Section 2036(a)(2). The most recent decision (Strangi III) holds that the transferred assets were properly included under Section 2036(a)(1), and therefore the court did not need to reach the Service's alternative contention under Section 2036(a)(2). Does that foreclose the Service from raising Section 2036(a)(2) in circumstances in which Section 2036(a)(1) or the bona fide sale exception contained in Section 2036(a) do not apply? This article closely analyzes Strangi III in light of the protracted and complex history surrounding this long-awaited decision and identifies possible practitioner responses.

Trusts -- English Style

Oxford University Press publishes a variety of books which focus on the English law of trusts.  These books would make valuable and interesting resources, either for your own library or for the library's collection at your school, for both general knowledge and research.