Wills, Trusts & Estates Prof Blog

What will your body do when "you" are gone?

Maggie Koerth-Baker has compiled a list of things you (or, more accurately, your corpse) may do after you die.

Here is the list -- for the details, see Things your body can do after you die, CNN.com, April 30, 2008:

1. Get married
2. Unwind with a few friends (mummy unwrapping parties)
3. Tour the globe as a scandalous work of art
4. Fuel a city
5. Get sold, chop shop style
6. Become a Soviet tourist attraction
7. Snuggle up with your stalker
8. Don't spread an epidemic
9. Stand trial
10. Stave off freezer burn

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.

The Estate Planning--Art Interface

Lance S. Hall (ASA, cofounder and President of FMV Opinions) has recently authored a article entitled The New Frontier: Non-Charitable Estate Planning Transfers with Fractional Interests in Art (and Other Personal Property).

Here is the conclusion of his article:

With the art market reaching new highs and investor interest in art exceeding previous norms, increased scrutiny to the estate planning needs of art collectors and investors is required.  With the changes in the rules for charitable gifting under the 2006 Pension Protection Act, charitable gifts of art are no longer as attractive.  Alternatively, fractional interest gifting to the junior generation may result in significant estate tax reduction.  Even if a gift is not made, art investors/collectors in community property states may be able to avail themselves of undivided interest discounts at death.

Clearly, undivided interest discounts for art and other personal property are likely to incur close scrutiny and outright rejection by the IRS. However, under the principles of "fair market value" an undivided interest discount is applicable. The challenge will be convincing the court that an analysis with no empirical data involving actual undivided interest sales in art will meet the taxpayer's burden of proof. The courts have overcome identical difficulties associated with the lack of empirical data when discounting undivided interests in real estate. The issues are no different with art, collectibles and other personal property. An objective measure of the hierarchy of discounts applicable to different asset classes is to examine the relative volatility of the individual art or personal property with other classes of investments where empirical data is available (real estate is generally less volatile than stock and art, stock is generally less volatile than art, art is generally less volatile than gold and commodities). Then, the specific attributes of the art (or other personal property) could be used to more subjectively adjust the discount up or down, accordingly.

To focus the court's attention to the lack of control and lack of marketability of the interest, and away from the right to partition, a transfer made subject to an agreement to waive the right to partition is advisable.

With the charitable gifting no longer as advantageous, the estate planning professional can expect to see a significant rise in fractional interest discount planning for art (and other personal property).

Israel Acts to Increase Organ Donation

The Knesset has recently approved two laws aimed at increasing the number of organ donations made by the citizens of Israel.

The following is from Amnon Meranda, Knesset approves organ donation law, Ynetnews.com, March 25, 2008:

The first law on brain and respiratory death states that brain death would be defined as death with all its implications. * * *

The issue of defining the time of death was raised in an attempt to encourage the religious public to donate organs. Members of the Knesset's Labor, Welfare and Health Committee sought to reach an agreement with the Chief Rabbinate and rabbinical religious authorities on a definition of the donor's death.

MK Otniel Schneller * * * the bill's initiator, held negotiations over the past few months with different elements in the haredi world and among the religious public before reaching the historic agreement that led to the formation of a law defining brain death.

According to the law, the time of brain-respiratory death will be in a situation when the person is proclaimed dead by two certified doctors, according to fixed parameters (no blood pressure, failure to breathe without need for life support, no response from the pupils and an absence of other reflexes). * * *

The [second] new law states that a living person who donated his organs will receive the status of a chronic patient after the donation is made, and will not have to pay the self-participation fee for any medical service resulting from the donation, in addition to NIS 18,000 (about $5,100) in compensation from the State.

In addition, the donor will be entitled to a recovery of expenses for psychological treatment and a recovery leave, and will receive a merit certificate from the State. The donor will also be exempted from paying the entrance fee to nature reserves and national parks. * * *

The law includes an innovative clause giving preference to people who sign the donor card should they be in need of an organ transplant in the future.

Note that this latter provision matches the philosophy behind the LifeSharers organization in the United States.

Uniform Trust and Estate Statutes, 2008-2009 Edition

Uniform Trust and Estate Statutes (2008-2009 edition) prepared by John H. Langbein and Lawrence W. Waggoner is now available from Foundation Press.

Here is a description of this new edition:

Designed to be used with any casebook or textbook, this statutory collection provides law students with a single-volume source containing all the uniform acts needed in a trusts and estates course (as well as the United Kingdom family provision legislation, included for comparative purposes). The 2008-2009 Edition contains the full statutory texts of the principal Uniform Acts pertaining to trusts and estates, including the Uniform Probate Code, the Uniform Trust Code, and the various special-purpose acts. The book supplies full texts of the three recently-promulgated acts: the Revised Uniform Anatomical Gift Act, the Uniform Power of Attorney Act, and the Uniform Prudent Management of Institutional Funds Act. As in past editions, the 2008-2009 Edition reproduces the official comments for the substantive articles (II and VI) of the Uniform Probate Code; for the Uniform Trust Code; and for most of the other Uniform Acts.

The book groups the trust and estates statutes in three parts.

• Part One, Probate Statutes, primarily contains the Uniform Probate Code (1990 text, incorporating all subsequent amendments). The Uniform Probate Code incorporates several freestanding Acts, including the Uniform Disclaimer of Property Interests Act (1999) and the Uniform Estate Tax Apportionment Act (2003).
• Part Two of the book, devoted to Trust Statutes, begins with the Uniform Trust Code (2000), incorporating all subsequent amendments. Part Two also contains the Uniform Principal and Income Act (1997), the Uniform Prudent Investor Act (1994), and the Uniform Custodial Trust Act (1987).
• Part Three, containing other Uniform Acts, includes the Uniform Parentage Act (2000, with 2002 amendments); the Uniform Health-Care Decisions Act (1993); the Uniform Simultaneous Death Act (1993); the Uniform Fraudulent Transfer Act (1984); the Uniform Transfers to Minors Act (1983, with 1986 amendments); the Model Marital Property Act (1983); and the Uniform Premarital Agreement Act (1983).

The 2008-2009 edition incorporates recent amendments to the UPC, adopted as technical amendments in 2008. The principal change is to the elective share, which has been revised to simplify the measure. The main substantive revision increases the surviving spouse's minimum share to 50 percent of the marital-property portion of the augmented estate.

A unique feature of the book is that juxtaposes with the current Uniform Acts certain carefully selected extracts of important provisions from former versions of various Uniform Acts, especially the pre-1990 version of UPC Article II; and selected provisions from the Restatement (Third) of Trusts (2003) and the Restatement (Third) of Property: Wills and Other Donative Transfers (1999-2003).

Trusts CLE -- Domestic and International

On May 22-23, 2008, Financial Events International is sponsoring a seminar entitled Advanced Planning: Domestic and International Trusts in New York.

Here is a description of the program:

Our conference will deal with trusts and estate planning for both U.S. clients with foreign connections and foreign clients with U.S. connections and discuss thoroughly Tax and reporting rules relating to foreign trusts, their regulation and their implementing. This event will also facilitate networking among international and U.S. delegates

This is an ideal event for lawyers, private bankers, wealth managers and trust company representatives from across the U.S., Canada, Latin America, the Caribbean and other international jurisdictions worldwide.

Speakers and presenters will include a broad mix of international experts that will guide you through the key legal, regulatory and taxation issues of getting up and managing domestic and international trusts.

Specific topics for this discussion include:

• Cross Border Estate Planning (with a sample case)
• Asset Protection
• Trust Administration- Jurisdiction Comparisons
• Trust Protector Issues: The Use of Trust Protectors in International and U.S. Trusts
• Private Trust Companies- Their Proliferation and Uses
• 2005 Bankruptcy Code Analysis- Impact on U.S. Assets and U.S. Trusts
• Integration of Trusts and Family Offices
• Life Insurance, Including Domestic and International PPVUL, An Increasingly common Trust Asset
• Foreign and Domestic Foundations- Uses, Integration, Application
• Case Study: Family Office Caliber Planning for Multi-National Families
  Dealing with Institutional Trustees
• OECD/FATF Updates and Impact on Trust Planning
• Swiss Trusts- Taxation
• Delaware Trusts – the latest
• Outsourcing Your Private Trust Companies- A New Kind of Trustee

Cohabiting Siblings Denied Same Rights as Married and Same-Sex Couples

Two sisters in England (Joyce and Sybil Burden) have lived together for most of their lives.  They never married and took care of their parents and other relatives.

Since 1976, they have attempted to be recognized as cohabiting couple for tax purposes.  Their requests have always been denied.

Recently, the Burden sisters appealed to the the European Court to obtain the same tax rights as married and same-sex couples.  By a 15-2 vote, the Human Rights judges denied their claim holding that they were not unfairly discriminated against.

Because of the ruling, when the first sister dies, the surviving sister will have to sell their home to raise the money to pay the estate tax which will be due on the home.

See Sisters lose European tax battle, BBC News, April 29, 2008.

Special thanks to Joel Debris (Professor of Law, CU Davis School of Law) for bringing this article to my attention.

Exculpatory clause in power of attorney deemed invalid

The principal executed a power of attorney which granted the agent broad powers to make gifts to himself, exonerated the agent from any liability to the principal or anyone else, and purported to relieve the agent from any duty to account.

The agent used his authority to transfer the principal’s property to himself and members of his family.

In a proceeding brought by the administrator of the principal’s intestate estate, the court held that the agent had violated his fiduciary duties to the principal, that the exoneration clause was void as contrary to public policy and the duties of an agent, and that the attempt to relieve the agent from the duty to account was void as against public policy.  In re Mueller, 853 N.Y.S.2d 245 (N.Y. Sur. Ct. 2008).

Prior will admitted to probate through application of dependent relative revocation

The testator’s will gave his estate to his spouse if she survived and, if she did not survive, to two of his three children by a prior marriage.

The testator executed a new will making all three children contingent beneficiaries.

On returning home from his lawyer’s office where he executed the second will, he destroyed the prior will stating that he did not want the third child to know he had been omitted from the prior will.

After the testator’s death, the three children challenged the second will alleging it had not been property executed.

In In re Estate of Oliva, 880 N.E.2d 1223 (Ind. Ct. App. 2008), the court affirmed the dismissal of the children’s action, holding that if the second will were invalid, the prior will would be admitted to probate under the doctrine of dependent relative revocation because the destruction of the prior will was “clearly conditional” on the validity of the new will and intestacy would be contrary to the testator’s intent as shown in both wills.

The settlor must have testamentary capacity to create and amend a revocable trust

In the course of affirming summary judgment against charities challenging the validity of the amendments made by the settlor of a revocable trust shortly before his death, the court in Maimonides School v. Coles, 881 N.E.2d 778 (Mass. App. Ct. 2008), held that because a pour-over will and a “contemporaneously executed revocable inter vivos trust” are related parts of single testamentary scheme, execution of an amendment to the trust requires the level of capacity necessary to make a valid will.

Intestate Succession Under Hindu Law

Taru Jain (Advocate, Supreme Court of India) has recently posed an article on SSRN entitled General Principles of Intestate Succession Under Hindu Law.

Here is the abstract of this article:

Succession implies the act of succeeding or following, as of events, objects, places in a series. In the eyes of law however, it holds a different and particular meaning. It implies the transmission or passing of rights from one to another. In every system of law provision has to be made for a readjustment of things or goods on the death of the human beings who owned and enjoyed them.

In the present paper I discuss and analyze the rules of inheritance that the Hindu Succession Act, 1956 prescribes for matters of succession when an individual (a Hindu male or female) dies without prescribing for how his/her property shall devolve upon his/her death i.e. rules of intestate succession.