Wills, Trusts & Estates Prof Blog

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

Friday, August 28, 2009

Article Addresses Dilemma of Fiduciary Conflicts

Schwarczs Steven L. Schwarcz (professor of law, Duke) has posted on SSRN his article entitled Fiduciary Conflicts.  The abstract of the article is below:

This article examines the dilemma of a fiduciary acting for parties who, as among themselves, have conflicting commercial interests — an inquiry fundamentally different from that of the traditional study of conflicts between fiduciaries and their beneficiaries. Existing legal principles do not fully capture this dilemma because agency law focuses primarily on an agent’s duty to a given principal, not on conflicts among principals; trust law focuses primarily on gratuitous transfers; and commercial law generally addresses arm’s length, not fiduciary, relationships. The dilemma has become critically important, however, as defaults increase in the multitude of conflicting securities (e.g., classes of securities of the same issuer having different priorities or sources of payment) that are typical of modern finance. A fiduciary, such as a trustee, acting for investors in these securities faces the difficult task of trying to understand and balance the respective obligations owed to conflicting classes and the risk of being sued no matter how the balancing is performed.

August 28, 2009 in Articles, Scholarship, Trusts | Permalink | Comments (0) | TrackBack (0)

The Origins and Future of Sony/ATV

JacksonthreeMichael Jackson's share of Sony/ATV is probably the most notable asset in Jackson's estate.  According to Julie Creswell, Turning Music Into Dollars at Sony/ATV, NY Times, Aug. 22, 2009,

Sony/ATV Music Publishing is a joint venture created in 1995 between the Sony Corporation and trusts formed by the late pop giant Michael Jackson.


While Sony executives and lawyers for Mr. Jackson’s estate say they see no changes afoot, the structure of the partnership would be altered if the estate put its stake on the block.

Sony would have first-refusal rights if that happens, and company executives say they would be interested in increasing their holdings.

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

August 28, 2009 in Current Events, Estate Administration | Permalink | Comments (0) | TrackBack (0)

Thursday, August 27, 2009

Portability of the Estate Tax Exemption in the Taxpayer Certainty and Relief Act of 2009

Estate_tax The August 2009 Real Property, Trusts & Estate Law eReport contains an article by Timothy J. Vitollo entitled The Taxpayer Certainty and Relief Act of 2009

The introduction of the article is below:

For more than twenty years, members of the ABA have been trumpeting the estate planning simplification for modestly wealthy taxpayers that would result from portability of the estate tax exemption. Formally recommended by the ABA Tax Section’s Task Force on Transfer Tax Restructuring in 1988 (41 Tax Law. 395), making the estate tax exemption portable would enable a decedent’s surviving spouse to take advantage of any remaining estate tax exemption not utilized by the decedent. While the Taxpayer Certainty and Relief Act of 2009 (S. 722, “TCRA”) has not yet emerged from the Senate Committee on Finance, it provides the clues as to what the final portability provisions might look like.

August 27, 2009 in Estate Planning - Generally, Estate Tax | Permalink | Comments (1) | TrackBack (0)

CLE on Captive Insurance Companies

CleThe ABA section of Real Property, Trust & Estate Law is sponsoring a 90 minute teleconference and live audio webcast CLE entitled "Captive" Insurance Companies and Closely Held Enterprises: Income Tax and Transfer Tax Opportunities and Implicationson Sep. 1, 2009.

The description of the CLE is below:

Once the domain of the Fortune 500, captive insurance companies are now accessible by families and family-owned enterprises. The family business can use a captive to not only reduce casualty insurance costs, but to also defer/reduce income taxes, improve risk management practices, and provide wealth transfer opportunities.

During this presentation, we will examine the following:

• What is a captive?

• Brief tax law history of captives

• Types of casualty risks insurable in a captive

• Income tax treatment of captives

• Jurisdiction (onshore versus offshore)

• Business planning opportunities

• Estate planning opportunities

• Implementation process

• Identifying prospects

• Potential problem areas

August 27, 2009 in Conferences & CLE, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (1) | TrackBack (0)

Community Property Survivorship Agreements in Texas: Survivorship & Revocation

Texas Community Property Survivorship Agreements: Holmes v. Beatty, 52 Tex. Sup. Ct. J. 967 (Tex. 2009), rehearing filed.

Statement of Survivorship Feature: Husband and Wife held investment accounts with the designation “JT TEN.”  The spouses signed the agreement but did not indicate whether the account had, or did not have, the survivorship feature.  The appellate court held that these accounts did not have the survivorship feature because they did not include an express statement of the survivorship feature as required by Probate Code § 452.

In a significant departure from established Texas law, the court determined that holding community property as joint tenants automatically includes the survivorship feature and that the designation “JT TEN” is an acceptable abbreviation.  In so deciding, the court relied on the common law under which joint tenancies carried with them the survivorship feature.  However, the court disregarded long-established Texas law which requires that the survivorship be expressly stated.  See Probate Code § 46(a) (survivorship in separate or individual property cannot be inferred from the mere fact that the property is held in joint ownership); Probate Code § 452 (requiring community property survivorship agreements to contain an express statement of the survivorship feature); Stauffer v. Henderson, 801 S.W.2d 858 (Tex. 1990) (holding that extrinsic evidence cannot be used to show a right of survivorship for joint bank accounts between non-spouses).

The court bases its conclusion on the allegedly “weaker” language of Probate Code § 452 which does not require the survivorship language to be stated in “substantially” the same manner as provided in the statute as does Probate Code § 439.  The court explains that “[p]recedent, trade usage, and seminal treatises make clear that joint tenancies carry rights of survivorship.” 

Moral:  Community property held as joint tenants automatically has the survivorship feature even if that feature is not expressly stated or intended by the spouses.

Revocation: Husband and Wife owned stocks which clearly stated that the spouses were holding them as joint tenants with rights of survivorship.  However, the spouses did not sign the certificates.  The appellate court held that their failure to sign the certificates resulted in a valid community property survivorship agreement not being created because Probate Code § 452 requires the agreement to be signed by both spouses.

The Texas Supreme Court reversed.  The court explained that the accounts from which the stocks were issued were held as joint tenants and had the survivorship feature.  The only way for the spouses to terminate the survivorship feature was through a subsequent written agreement or to dispose of the assets.  Probate Code § 455.  The mere fact that the stock was issued out of the account in certificate form did not act as a disposition of the property covered by the agreement.

Note that the court rejected the argument that Probate Code § 450 applied to the certificates.  The court pointed to Probate Code § 46(b) which states that survivorship agreements in community property are governed by Part 3 of Chapter XI.  Because § 450 is not in this Part, it is inapplicable to community property survivorship agreements.

Moral:  Merely changing the form in which community property with survivorship rights is held is not sufficient to revoke the survivorship agreement.

August 27, 2009 in Death Event Planning, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

IRS to Receive UBS Account Info

UBSAs part of a tougher stance on tax havens and tax evaders, a US-Swiss deal will provide information regarding approximately 4,400 suspect UBS accounts to the IRS. 

The IRS is offering a six-month amnesty program during which tax evaders may escape jail time by disclosing taxes evaded and paying back taxes and a penalty. According to the IRS, publicity over the UBS case has lead to hundreds of citizens seeking amnesty under the program, which ends on September 23.

Britain, Germany, and France have been reported to be taking a tougher stance on tax havens as well.

See David R. Francis, Economic Scene: A tougher stance on tax havens, Christian Science Monitor, Aug. 19, 2009.

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

August 27, 2009 in Current Events, Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 26, 2009

Israelis React to Swedish Article On Israeli Organ Harvesting

Swedish_flag A Swedish newspaper article calling for an investigation into claims that Israeli soldiers harvested the organs of dead Palestinians in the 1990's has not been well-received by the Israeli community.

According to the author of the article, there is no proof that the organ harvesting occurred; however, families who suspect that the organs of loved ones were harvested have offered to have the bodies exhumed for investigations. 

Israeli officials have called the op-ed article blatantly racist and have asked Sweden's government to condemn it. 

See Tricia Escobedo, Swedish paper's organ harvesting article draws Israeli outrage, CNN, Aug. 19, 2009.

August 26, 2009 in Current Events, Death Event Planning | Permalink | Comments (0) | TrackBack (0)

Indiana Creates Funeral Planning Directive

Indiana Indiana has created a procedure for a person to execute a Funeral Planning Declaration.  A statutory form is provided, which allows an individual to designate ceremonial arrangements, grave memorials, and a method of body disposition.  2009 Ind. Legis. Serv. P.L. 143-2009.

August 26, 2009 in Death Event Planning, New Legislation | Permalink | Comments (1) | TrackBack (0)

Would-be IBM Heiress Waiting for October Hearing

IBM I previously reported on the battle between the estate of Thomas Watson, Jr., former IBM CEO, and Patrica Spado, the female companion that Watson's daughter adopted as an adult as a way to solidify their romantic relationship.  Below are some more details.

  • Watson's daughter pursued her adoption of Spado to ensure Spado's financial stability and when the relationship fell apart, she told Spado she would not contest the validity of the adoption.
  • The adoption makes Spado a grandchild of Watson, and Watson's grandchildren are the beneficiaries of trusts worth $10 million each.
  • While the Maine Supreme Court validated the adoption, Spado is waiting for an October hearing in Conneticut to determine whether Spado is a grandchild for purposes of the trusts.
  • According to Spado's attorney, well-established language that excludes adopted adults was not included in the documents establishing the trusts.

See Thomas B. Scheffey, $10 Million Inheritance at Stake in Suit Over IBM Heiress' Same-Sex Adoption, Conn. Tribune, Aug. 21, 2009.

Special thanks to Raymond Sheffield (attorney, Sheffield Law Office, San Jose, CA) for bringing this article to my attention.

August 26, 2009 in Current Events, Estate Administration | Permalink | Comments (0) | TrackBack (0)

Wills: The Benefit of Initialing Each Page

Texas In re Estate of Romancik, 281 S.W.3d 592 (Tex. App.—El Paso 2008, no pet. h.): Testator signed page three of his will but did not sign the prior pages.  The will left his entire estate to Mother.  Wife claimed that Testator’s signature on page three was insufficient to demonstrate that he had testamentary intent with respect to the prior pages.  Both the trial and appellate courts rejected Wife’s claim holding that the document reflected Testator’s testamentary intent.

Moral:  Although not legally required, it may be prudent practice to have the testator initial (sign) each page of the will to demonstrate that the testator intended each page to be a part of his will.

August 26, 2009 in New Cases, Wills | Permalink | Comments (0) | TrackBack (0)