Wills, Trusts & Estates Prof Blog

New Postings Alert Now Available via Twitter

If you interested in following the Wills, Trusts, and Estate Blog on Twitter so you receive immediate notification whenever a new post is made, please follow me on Twitter.  My Twitter user name is Gerry_Beyer.

I hope you find this new development helpful.

Top SSRN Downloads

Here are the top downloads from September 1, 2009 to October 31, 2009 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	128	Miller: Effective FLP Line Drawing Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: October 12, 2009 Last Revised: October 12, 2009
2	119	Global Trends and Constraints on Tax Policy in the Least Developed Countries Allison Christians, University of Wisconsin Law School, Date posted to database: August 11, 2009 Last Revised: September 11, 2009
3	113	Section 6694 Preparer Penalties and Tax Advice: The Latest on the Constantly Moving Target Scott A. Schumacher, University of Washington, Date posted to database: September 11, 2009 Last Revised: September 11, 2009
4	105	Conflicts of Interest and Nonprofit Governance: The Challenge of Groupthink Melanie B. Leslie, Cardozo Law School, Date posted to database: September 25, 2009 Last Revised: October 20, 2009
5	99	The Most Esteemed Act of My Life: Family, Property, Will, and Trust in the Antebellum South Stephen Duane Davis II, Alfred L. Brophy, U.S. District Court, Northern District of Alabama, University of North Carolina at Chapel Hill - School of Law, Date posted to database: July 18, 2009 Last Revised: July 18, 2009
6	83	Navigating the Deaccessioning Crisis Derek Fincham, Loyola University New Orleans College of Law, Date posted to database: September 8, 2009 Last Revised: October 22, 2009
7	75	Bill Would Have Far Reaching Effect on Gift and Estate Tax Valuation Jonathan G. Blattmachr, Scott A. Nammacher, Milbank, Tweed, Hadley & McCloy LLP, Author - affiliation not provided to SSRN, Date posted to database: August 24, 2009 Last Revised: August 24, 2009
8	75	Ethical Challenges in Representing Families in Family Limited Partnerships Mary F. Radford, Georgia State University - College of Law, Date posted to database: August 24, 2009 Last Revised: September 28, 2009
9	74	Did a Unanimous Supreme Court Misread ERISA, Misread the Court's Precedents, Undermine Basic ERISA Principles, and Encourage Benefits Litigation? Albert Feuer, Law Offices of Albert Feuer, Date posted to database: October 12, 2009 Last Revised: October 12, 2009
10	73	Alternate Valuation - Now, Perhaps, More Important than Ever Jonathan G. Blattmachr, Alvina H. Lo, Milbank, Tweed, Hadley & McCloy LLP, Credit Suisse Private Banking, Date posted to database: August 25, 2009 Last Revised: August 25, 2009

Is the Prudent Investor Really Prudent?

Stewart E. Sterk (professor of law, Cardozo) has posted on SSRN his article entitled Rethinking Trust Law Reform: How Prudent is Modern Prudent Investor Doctrine?, Cornell L. Rev. (forthcoming).

The abstract of the article is below:

During the 1990s, modern portfolio theory provided the theoretical foundation for significant reforms in trust investment doctrine, reforms that freed trustees from a legal regime in which they faced potential liability for making 'speculative' investments. The reforms enabled trustees to pursue investment policies that protected beneficiaries against inflation risk. But the reforms worked too well: they encouraged trustees to invest a higher percentage of trust assets in equities just in time for a decade that has seen two precipitous stock market declines.

Although no sensible investment strategy would have avoided losses during these periods of market turmoil, the doctrinal reforms endorsed in the Restatement (Third) of Trusts and the Uniform Prudent Investor Act made matters worse. By structuring trust investment doctrine as a regime of vague standards, the UPIA and the Restatement provided trust beneficiaries with little protection against agency costs that would lead trustees to invest too heavily in equities. The current regime would be problematic even if its economic underpinnings - modern portfolio theory and, in particular, the efficient capital markets hypothesis - accurately described economic reality. But market behavior over the last ten years, combined with recent theoretical work, weaken those underpinnings and make the current regime’s bias toward equity investments even more questionable. A legal regime that replaced the current standard-based system with one providing trustees with 'safe harbors' for making investment decisions would provide trustees with more guidance, while simultaneously providing better protection to beneficiaries against excess market risk.

Happy Halloween!

Many law school classes have one or more holidays which are especially relevant.  For example, Family Law has Valentine's Day, Mother's Day, and Father's Day, Labor Law has Labor Day, Environmental Law has Earth Day, Military Law has Memorial Day, and Law and Religion has Christmas, Hanukkah, Ramadan, etc.

Halloween, with its fascination with death, may be the most relevant holiday to those who teach wills, trusts, estates, probate, and estate planning. So, however you celebrate, have fun and be safe!

What to do When a Facebook Friend Passes Away

The following, taken from The Facebook Blog, discusses how to memoralize a friend's account after the friend passes away:

We understand how difficult it can be for people to be reminded of those who are no longer with them, which is why it's important when someone passes away that their friends or family contact Facebook to request that a profile be memorialized. . . . By memorializing the account of someone who has passed away, people will no longer see that person appear in their Suggestions.

When an account is memorialized, we also set privacy so that only confirmed friends can see the profile or locate it in search. We try to protect the deceased's privacy by removing sensitive information such as contact information and status updates. Memorializing an account also prevents anyone from logging into it in the future, while still enabling friends and family to leave posts on the profile Wall in remembrance.

Max Kelly, Memories of Friends Departed Endure on Facebook, The Facebook Blog, Oct. 2009.

Fall AALS Trusts & Estates Newsletter -- Call for Updates

The following message is posted on the request of Prof. Laura Rosenbury, Washington University School of Law:

Hello Trusts and Estates Colleagues,

I am compiling information for the fall newsletter of the AALS Section on Trusts and Estates.  Please email me with news of your or your colleagues’ accomplishments, publications, career moves, service and other professional activities.  We have several hundred Section members; let us know how you're all doing.

Please send your information to [email protected] by November 6.  Thanks so much.

Laura

Conflit of Interest Challenges in Governing Nonprofits Organizations

Melanie B. Leslie (professor of law, Cardozo) has posted on SSRN her article entitled Conflicts of Interest and Nonprofit Governance: The Challenge of Groupthink.  

An abstract of the article is below:

The central dilemma for nonprofit law is that nonprofit fiduciaries are not accountable to a principal. Although state and federal governments have authority to enforce directors’ fiduciary duties, enforcement efforts range from minimal to nonexistent. The nonprofit corporation is also free from the market pressures faced by its for-profit counterpart. It is up to boards of directors to police themselves – to ensure that the nonprofit is run effectively and that charitable assets go towards mission and not into the pockets of insiders. Decades of psychological research about group dynamics teach us that “groupthink” can undermine social norms that facilitate good governance procedures. Groupthink occurs when directors place allegiance to fellow board members ahead of the nonprofit’s best interests. Groupthink blinds directors to conflicts of interest, and may also induce directors to refrain from adequately monitoring ongoing business relationships with board members. As a result, conflict of interest transactions often divert charitable assets away from the charities’ intended beneficiaries and into directors’ pockets. Recent nonprofit scandals, such as Yeshiva University’s decision to invest $15 million dollars with Ezra Merkin, the chair of its finance committee, who then quietly entrusted it to Bernard Madoff, demonstrate that charities are uniquely susceptible to groupthink. Because currently, fiduciary duty law is structured as a set of fuzzy standards that appear to sanction self-dealing, the law facilitates groupthink. Restructuring the state law fiduciary duty of loyalty as a set of clear rules would help support good governance norms. A flat prohibition on self-dealing and conflict of interest transactions would be the most effective way to ensure that fiduciaries place the best interests of the nonprofit ahead of self-interest. Short of that, clear directives requiring disclosure of conflicts, investigation of alternatives and proof that inside transactions are clearly below market would do much to counter the damaging impact of groupthink.

Quieting Your Heirs With a No-Contest Clause

The New York Times recently discussed strategies for preventing heirs from challenging a decedent's estate planning documents, focusing on a no-contest clause.

• No-contest clauses threaten disinheritance for making an unsuccessful challenge to the estate planning documents.
• The clause can be an effective deterrent for heirs included in the estate plan and provided with an inheritance large enough not to gamble.
• Most states recognize no-contest clauses, but Florida prohibits them.

Alternatively, the article provides another tactic for extreme cases. "It involves setting up barriers to will contests by signing a series of documents, each only slightly different from the one it replaces, over a period of years. Those who want to contest the plan must then have each of these documents found invalid before they get to the one they want to apply."  Deborah L. Jacobs, Clauses Aimed at Keeping the Heirs Quiet, NY Times, Oct. 28, 2009. 

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

Wal-Mart Offers Caskets and Urns

As of last week, Wal-Mart is offering caskets and urns on its website, although with an appropriately more stringent return policy.  One source indicates that Wal-Mart may eventually offer pet urns and memorial jewelry as well. 

The president of the National Funeral Home Directors Association does not expect Wal-Mart's new product line to affect business, stating that caskets available online have had only a small impact on funeral home business in the past. Ultimately, whether the consumer prefers low prices or the comfort of a funeral home may determine if this prediction is correct.  

See AP, Wal-Mart Selling Caskets, Urns Online, FoxNews, Oct. 28, 2009. 

Using a Special Needs Trust in Elder Estate Planning

According to a recent article from the Academy of Special Needs Planners, an elderly person applying for long-term Medicaid benefits for nursing home care can benefit from a sole benefit trust.  Specifically, when a medicaid applicant transfers assets to a special needs trust for the sole benefit of a person with disabilities, the transfer will not disqualify the applicant from receiving medicaid benefits.  

The article warns, however, that a sole benefit trust is unlike a typical special needs trust because the trust cannot have a remainder beneficiary and must pay out all assets over the special needs beneficiary's actuarial life expectancy.  If the special needs beneficiary is already receiving government benefits through means-based programs, the distributions from the sole benefit trust could very well jeopardize those benefits. 

For more information, see Academy of Special Needs Planners, How a 'Sole Benefit Trust' Can Either Hurt or Help a Person With Special Needs, Oct. 23, 2009.