Wills, Trusts & Estates Prof Blog

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

Wednesday, October 29, 2008

Non-Probate Assets -- An Empirical Study

SpitkoFellows_mary_louiseE. Gary Spitko (Professor of Law, Santa Clara Law School), Mary L. Fellows (Everett Fraser Professor of Law, University of Minnesota School of Law), and Charles Q. Strohm (Ph.D. Candidate, University of California) have posted their article on SSRN entitled An Empirical Assessment of the Potential for Will Substitutes to Improve State Intestacy Statutes.

Here is the abstract of their article:

This article uses an empirical study to test whether, in the absence of a will, beneficiary designations in will substitutes provide reliable evidence for determining decedents' donative intent in an intestacy statute. No previous scholarship has explored the relationship between will substitute beneficiary designations and intestacy statutes. Throughout this project, we remained mindful that the import of will substitute designations can be ambiguous when it comes to imputing intent with regard to an intestate decedent's probate estate. The empirical study used a factorial research design in which interviewers asked respondents contacted by telephone to react to a series of hypothetical vignettes that differ along one or more dimensions. The survey tested two central hypotheses. The first hypothesis, which we call the new heir hypothesis, was that, if a will substitute beneficiary is not otherwise an heir, the will substitute reveals a decedent's intent to create a new heir. The second hypothesis, which we call the advancement hypothesis, was that, if a will substitute beneficiary is otherwise an heir, the will substitute reveals a decedent's intent to treat the proceeds from the will substitute as an advancement on that heir's share of the probate estate, resulting in a greater portion of the probate estate passing to the decedent's other heirs. We used bivariate and multivariate analyses to evaluate the data. This project goes a long way to identify the issues that must be resolved for will substitutes to play a role in the distribution of an intestate decedent's probate estate. In general, will substitutes should affect the distribution scheme of intestacy statutes only for decedents who die without a surviving spouse or a descendant. These decedents are the very people who we know least about in terms of their likely donative intent, and they should be the focus of any future empirical study regarding will substitutes and inheritance law. Although more empirical study is necessary, based on this study, there is little support for the advancement hypothesis. The results of this study do suggest that the more distantly related the decedent's heirs determined under a traditional intestacy statute, the more likely a decedent would want a will substitute beneficiary who is not otherwise an heir to be treated as a new heir and a will substitute beneficiary who is otherwise an heir to be treated as a favored heir. The results of our empirical study further suggest that the number of will substitute designations and, to a lesser extent, the value of those will substitutes relative to the probate estate matter. Any law reform would have to establish some threshold number and value before taking into account will substitutes in determining the distribution of a decedent's estate. This empirical study has opened up the possibility for a major reform of the intestacy statutes in this country. The question no longer is whether will substitutes should be integrated into intestacy schemes, but how.

October 29, 2008 in Articles, Intestate Succession, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Planning for Disability -- Australian Style

Carney_terry Keyzer_patrick_2 Terry Carney (Professor of Law, Sydney Law School) and Patrick Keyzer (Professor and Deputy Dean, Bond University) have posted on SSRN their article entitled Planning for the Future: Arrangements for the Assistance of People Planning for the Future of People with Impaired Capacity, 7 Queensland U. Tech. L. & Just. J. 255 (2007).

Here is the abstract of their article:

This paper reviews the unmet need for legal services for people acting as carers of people with impaired mental capacity, including the legal needs of older carers. It examines private and public planning options, such as wills and estate planning, powers of attorney, trusts and adult guardianship - as ways of addressing the succession planning and service access needs of carers of people with impaired mental capacity. It argues that greater resourcing and professional/community education is required if sound planning is to be achieved for the future.

October 29, 2008 in Articles, Disability Planning - Health Care, Disability Planning - Property Management | Permalink | Comments (0) | TrackBack (0)

Britney Spears conservatorship to continue

Spears_britanyOn October 28, 2008 Los Angeles Superior Court Commissioner Reva Goetz extended the conservatorship over the person and property of singer Britney Spears for an indefinite period of time.

Here are some details from Anthony McCartney, Court extends Spears' conservatorship indefinitely, Yahoo!News.com, Oct. 29, 2008:

  • Britney's father (Jamie Spears) will remain as the conservator.
  • Britney did not oppose the extension of the conservatorship.
  • Commissioner Goetz did not place an expiration date on the conservatorship.
  • The basis for the extension was that Britney is "susceptible to undue influence."
  • The conservatorship acts as shield against lawsuits against Britney which may be the "real" reason Britney does not object to her "wardship" status.
  • For example, even though she recorded a new album and is getting ready for a major tour, she was deemed sufficiently unhealthy so that she did not need to give a deposition in one of the cases pending against her.

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

October 29, 2008 in Current Events, Guardianship | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 28, 2008

Family Limited Partnerships Analyzed

Schwidetzky_walterWalter D. Schwidetzky (Professor of Law, University of Baltimore School of Law) has posted his article on SSRN entitled Family Limited Partnerships: The Beat Goes On, 60 Tax Law. 277 (2007).

Here is an abstract of the article:

It is increasingly common for the older generation to form family limited liability entities (FLLEs), which are usually either limited partnerships or limited liability companies. The older generation then gifts the FLLE interests to the younger generation and/or leaves them to the younger generation as part of its estate. For estate or gift tax purposes, substantial valuation discounts are taken off what would be the proportional value of the underlying assets. These valuation discounts are commonly taken because the relevant FLLE interests lack control and are usually not as readily marketable as the underlying assets would have been. Discounts of 35% or greater are not unusual. If unqualifiedly allowed, this technique would be an estate tax bonanza. With a bit of slight of hand, the value of an estate could be dramatically reduced with perhaps little change in the underlying beneficial ownership or use of the assets. Tax advisors and their clients love it. The Service does not. The Tax Court has taken a tough line, usually applying I.R.C. - 2036 to ignore the FLLE and include the assets contributed to the FLLE in the decedent's estate. The 3rd and 5th Circuits (and to a much lesser extent the 1st Circuit) have had something to say on the subject as well. They have not been particularly taxpayer-friendly either. The article discusses and analyzes the relevant case law and makes recommendations for reform.

October 28, 2008 in Articles, Estate Tax, Gift Tax | Permalink | Comments (0) | TrackBack (0)

Investing IRAs in non-traditional assets

IraThe following excerpts are from Deborah L. Jacobs, Putting an I.R.A. to Work in Ventures Beyond Stocks, N.Y. Times, Oct. 23, 2008:

At a time when many I.R.A. portfolios are being battered by poor stock market returns, it is tempting to look for ways to replenish the coffers. One possibility is to switch to investments not traditionally associated with I.R.A.’s, like real estate and new business ventures. * * *

[N]ontraditional investments may encounter legal pitfalls not associated with more conventional retirement assets, like stocks, government bonds, C.D.’s and mutual funds. The most dangerous trap for the unwary is the regulation on self-dealing — a legal principle that prevents I.R.A. owners from making investments that benefit themselves or certain family members, even indirectly. * * *

Large financial institutions, which generally serve as custodians or trustees for the I.R.A. owner, usually stick with stocks, bonds and mutual funds, or their own financial products.

But an industry of about two dozen smaller firms has emerged that will serve as custodians of real estate and a wide range of exotic investments, from chicken manure to cypress tree farms. I.R.A.’s are not allowed to own life insurance, collectibles (like stamps, art or antiques) or stock in small partnerships known as Subchapter S corporations.

Special thanks to Matthew B. Bogin (attorney, Rockville, Maryland) for bringing this article to my attention.

October 28, 2008 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

The Estate Planning -- Psychology Interface

PsychologyThe following excerpts are from Elda Di Re & Terry Eyberg, Psychology of Succession Planning, Forbes.com, Oct. 21, 2008:

The family must * * * consider the psychology of succession planning, which includes a number of emotional issues that can impact a family's judgment or even cause the business owner to postpone succession planning. For example, mortality is difficult to discuss with family and friends, which can make succession planning a challenge. If someone is hasty or unwilling to plan ahead, there will be a financial impact.

Also, some business owners are reluctant to change and hesitant to plan for new management. Many often wait until they are approaching retirement before thinking about business transition. Unfortunately, at that point, it may be very difficult to bring children into the business.

Additionally, the business owner may fear losing power and control over the company, especially because identity and self worth are often tied to the business. The founder may put off constructing a succession plan because the thought of losing control of the company can be hard to accept.

Family dynamics can also be difficult for owners to manage. A tax-efficient estate plan can fail if family dynamics are not properly addressed at the start of estate planning. Intra-family fighting over financial and managerial interests in the business can harm a viable business.

That is why it is often beneficial for a third party to facilitate family business meetings to promote fairness and impartiality.

Special thanks to Neil Hendershot, editor of the PA Elder, Estate & Fiduciary Law Blog, for bringing this article to my attention.

October 28, 2008 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Social Security Benefits Calculator Update

Social_securityEarlier on this blog, I discussed how the Social Security Administration added a benefits calculator to its website called The Retirement Estimator.  This program produces estimates that are based on the user's actual Social Security earnings record.  In other words, after providing your Social Security number, birth date, place of birth, and mother's maiden name, the site accesses your records to make the estimates.

There are, however, some limitations of the Estimator.  For example, if a person is already receiving Medicare, even though still working, the Estimator will not produce an estimate of Social Security benefits.

This and other issues are slated to be fixed in future versions of the Estimator.

See Karen Damato, Encore, Wall St. J., Oct. 18, 2008.

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

October 28, 2008 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Monday, October 27, 2008

Rich divided on better candidate to be President

MoneyConventional wisdom is that low and middle class individuals are more likely to support Democratic candidates while wealthy individuals support Republican candidates.

According to Robert Frank, Political Divide in Richistan, Wall St. J., Oct. 18-19, 2008, at B4, this may not always be the case.

Frank reports that although more than 75% of individuals with a net worth between $1-$10 million support Sen. McCain, only one-third of individuals worth more than $30 million support McCain.

Frank suggests that individuals in the "lower" rich situation are concerned about the economy, saving taxes, etc.  However, individuals from the "upper" rich are more concerned with social issues.

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

October 27, 2008 in Current Events | Permalink | Comments (0) | TrackBack (0)

New York Update

Otoole_martinMartin O’Toole (Partner, Harter Secrest & Emery LLP) recently authored an article entitled Trusts and Estates, 58 Syracuse L. Rev. 1191. (2008).

Here is a summary of his article:

Mr. O’Toole discusses various areas of the practice of Trusts and Estates law.  Part I uses Federal cases to look at the deductibility of investment advisory fees and the scope of the probate exception to Federal diversity jurisdiction.  Part II focuses on New York legislation and looks at the examination of a fiduciary, late discovery of assets, Section 2307-a disclosures, after-born children, nomination of guardian/reports, disposition of remains, standby guardians and the need for a hearing, authorization of family members to make medical decisions for an individual with mental retardation, the statute of limitations for marital agreements, excludible income for Medicaid purposes and self-settled supplemental needs trusts, and the abandonment of a pre-need funeral account.  Finally, Part III takes New York cases of note and looks at arbitration cases, after-born children and reproductive technology, the use of a living trust to fund expenses of estate administration, termination of uneconomical trusts, beneficiary designations, attorney-client confidentiality in estate administration, the use of reformation proceedings to create supplemental needs trusts, bank accounts, the appointment of a public administrator as trustee, power of attorney cases, the ability of an attorney-executor to represent himself, the authority to sell property subject to a life estate, attorney’s fees, and the cy pres proceeding.

October 27, 2008 in Articles, New Cases, New Legislation | Permalink | Comments (0) | TrackBack (0)

New York slayers and tenancies by the entirety

New_yorkKathleen Reilly (J.D. Candidate, June 2009) recently authored an article entitled Making a Killing in Real Estate: Solving the Mystery of Murder’s Effect on Tenancy by the Entirety in New York—A Legislative Solution, 82 St. John’s L. Rev. 1203 (2008).

Here is an excerpt from the Note's introduction:

This Note focuses on issues that arise when the slayer and the victim have concurrent ownership of property as tenants by the entirety. Tenancy by the entirety is a unique form of concurrent ownership because it can only be formed in real property by husband and wife and cannot be unilaterally severed or partitioned. In addition, each tenant has a right of survivorship--meaning that, during their lifetimes, each tenant has a one-half undivided interest in the property, but upon the natural death of one tenant, title to the entire property vests in the survivor. When the death is the result of murder committed by the co-tenant, however, the survivor's interest is uncertain. In these cases, depriving the slayer of his interest under Riggs would not just prevent him from acquiring the victim's property, but may also result in a forfeiture of his own property interest.

October 27, 2008 in Articles, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)