Wills, Trusts & Estates Prof Blog

Validity of CLATs Remains in Doubt Despite IRS Guidance

Richard Fox (attorney, Philadelphia, PA) and Mark Teitelbaum (attorney) recently published their article entitled Validity of Shark-Fin CLATs Remains in Doubt Despite IRS Guidance, Est. Plan. J. (Oct. 2010). The conclusion is below:

Until the IRS clarifies its position, there would appear to be a question as to the validity of the shark-fin CLAT as a qualified charitable lead trust, particularly one funding a back-loaded balloon payment to charity using life insurance proceeds. Because of the risk of the disallowance of the income, gift, or estate tax charitable deduction, a potentially disastrous result, planners should exercise caution in using such a CLAT and should consider alternative structures. These alternatives include those leveraging the benefits of life insurance for the noncharitable remainder beneficiaries, rather than the charity.

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

Deportation Trusts Gain Popularity

Wealthy immigrants with questionable status are reaching out to estate planners to shield their property and protect their families in the event that they are deported. In most situations, a power of attorney and a designation of a temporary guardian will suffice, but some situations require a full-fledged trust.

“Deportation trusts” work like conventional asset protection trusts. The settlor retains possession of the assets while he is in the United States, and the asset protection kicks in if a deportation order is served, making it harder for authorities to freeze or confiscate assets. Some possible complications include:

• To open a bank or trust account, resident aliens must register with the IRS to get an international taxpayer identification number (ITIN).
• You need to make sure that you create the trust in a jurisdiction in which self-settled trusts are allowed. Neither Arizona nor California allow self-settled trusts.
• The usual asset protection statute of limitations applies. Thus, advance planning is critical because a “Nevada deportation trust, for example, would need to hold the assets for at least two years before providing any benefit.”

Scott Martin, Deportation Trusts Become Hot Commodity with Rich Undocumented Immigrants, The Trust Advisor Blog, Nov. 28, 2010.

Testamentary Intent -- Ambiguous Holographic Words

In In re Estate of Hendler, 316 S.W.3d 703 (Tex. App.—Dallas 2010, no pet. h.), Testator handwrote a statement in which he indicated that he was now divorced and that his prior will still exists on the bottom of the last page of Testator’s valid attested will.  The trial court granted summary judgment that this holographic material was a valid codicil and acted to republish the will.

The appellate court reversed.  The court determined that fact issues exist regarding whether Testator had testamentary intent when he placed the handwritten statement on the bottom of his attested will and thus summary judgment was improper.  The court explained that there are two interpretations of Testator’s words: (1) a mere recitation of facts that he is divorced had has not revoked his will and (2) a statement that he reviewed his prior will with his divorces in mind and that his prior will still states his property disposition desires.  Because both interpretations are reasonable, the trial court erred in issuing a summary judgment.

Moral:  Attorneys should warn clients not to make self-help changes to their existing wills or prepare holographic testamentary documents because the clients may not do so correctly.

Multimillionaire Who Isn't Allowed to Spend His Money

Despite owning over $65 million in assets, Ugo di Portanova controls a single credit card with a $1,000 limit. Mainly due to his diagnosis of schizophrenia, Ugo was declared incapacitated by a Harris County Probate Judge over forty years ago. Since then, over $50 million of his inheritance has gone to trustees, bankers, accountants, attorneys, and guardians.

The most recent battle between trustees and guardians involved a $5-10 million gift to Ugo’s unpaid guardian and friend of over 36 years, Tina LaMatta.  Guardians and their attorneys argue that this gift would help cover expenses associated with potential court fights when the LaMattas inherit Ugo's personal assets upon his death as provided in his will.  This gift has been blocked by trustees for nine years, costing Ugo approximately $4.5 million in litigation expenses.

One of Ugo’s former trustees stated, “A lot of people are making a lot of money off of him.”

For more information regarding Ugo’s court battles, see Lise Olsen, A Multimillionaire Who Rarely Gets to Spend a Dime, Houston Chronicle, Nov. 29, 2010.

Special thanks to Peter Parlapiano (2011 MBA/M.S. PFP candidate, Texas Tech) for bringing this to my attention.

Wills, Trusts & Estates Blog Named to ABA Journal's Blawg 100!

Thanks to your loyalty and support, I just received notice that this blog was named to the ABA Journal's Blawg 100.

Thank you!!!

Voting is now taking place to determine the "popular" favorite in each of 12 categories -- my blog is in the Law Prof Plus category.  I would greatly appreciate your taking the time to cast a vote for this blog by following this link -- vote here.

Thanks!!!

Courts Aren't Monitoring Guardians Successfully

The Senate Special Committee on Aging requested that the Government Accountability Office (GAO) report on how well the courts are monitoring guardians to prevent abuse of the elderly. Undercover GAO investigators were able to gain guardianship certifications using two fictitious identities: one with the Social Security number of a deceased individual and one with bad credit.

The GAO concluded “that courts failed to adequately screen potential guardians, appointing individuals with criminal convictions or significant financial problems to manage large estates; did not oversee guardians once they were appointed, allowing the abuse of vulnerable seniors and their assets to continue; and failed to communicate effectively or at all with federal agencies to stop the abuse.”

Some Courts Could Allow the Dead to Become Guardians of the Living, ElderLawAnswers, Nov. 1, 2010.

CLE on Grantor Trusts

The National Business Institute is sponsoring a 90-minute national live video webcast on December 15 entitled Grantor Trusts in a Nutshell. The program description is below:

Take your estate planning mastery a step beyond simple living trusts: explore the goals and mechanics of the grantor trusts, their more effective forms and specific provision language that maximizes their potential. Enrich your estate planning technique arsenal - register today!

• Review sample trust verbiage to save drafting time, ensure legal compliance and maximize results.
• Fully utilize the unique tax-saving opportunities afforded by effective use of intentionally defective trusts.
• Learn why it's important to know when to file the tax return for grantor trusts.

Order to Account Not Appealable

In Pollard v. Pollard, 316 S.W.3d 238 (Tex. App.—Dallas 2010, no pet. h.),Husband obtained an order from the trial court to require Wife’s independent executor to account under Probate Code § 149A.  The executor had resisted Husband’s request arguing that Husband was not an interested person who had standing to request an accounting claiming that Wife had successfully divorced Husband prior to her death.  The executor appealed.

The appellate dismissed the appeal for lack of jurisdiction.  The court explained that an order to account is interlocutory and not appealable because (1) no statute declares such an order to be final and (2) the order is not part of any proceeding other than the overall independent administration of Wife’s estate.

Moral:  A trial court’s order to the executor to account is not appealable.

Top SSRN Downloads

Here are the top downloads from September 27, 2010 to November 28, 2010 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	175	Financing Long-Term Care After Health Care Reform Richard L. Kaplan, University of Illinois College of Law, Date posted to database: October 16, 2010 Last Revised: October 21, 2010
2	164	Fundamentals of Texas Multiple-Party Accounts Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: September 20, 2010 Last Revised: September 20, 2010
3	144	Case Law Update Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: August 31, 2010 Last Revised: August 31, 2010
4	139	Lessons from the Supreme Court of Texas Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: October 23, 2010 Last Revised: October 23, 2010
5	123	The Price of an FLP Annual Exclusion Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: September 9, 2010 Last Revised: September 9, 2010
6	95	The 'Big Three' VEBAs and Other Stand-Alone Welfare Benefit Trusts: What Is and Is Not Novel about Them Andrew Stumpff, University of Michigan at Ann Arbor - Law School - Faculty, Date posted to database: November 15, 2010 Last Revised: November 15, 2010
7	92	When Do Fiduciary Duties Arise? James J. Edelman, University of Oxford - Faculty of Law, Date posted to database: October 26, 2010 Last Revised: November 13, 2010
8	90	Can a Modern Legal System Do without the Trust? Reinout M. Wibier, Tilburg University, Date posted to database: September 16, 2010 Last Revised: November 24, 2010
9	83	Access or Expectation: The Test for Fiduciary Accountability Robert Flannigan, University of Saskatchewan, Date posted to database: October 29, 2010 Last Revised: October 29, 2010
10	77	Critters in the Estate Plan Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: August 27, 2010 Last Revised: August 27, 2010

Spanos Puts His Stake of San Diego Chargers on the Market for Estate Planning Reasons

I recently blogged about Drayton McLane selling the Astros for estate planning reasons. Now Alex Spanos, minority owner of the San Diego Chargers, is selling his portion of the team for estate planning reasons as well. Spanos and his wife currently own 36% of the team, their four children own 15% each, and two additional owners own the last 4%. Thus, the Spanos family will continue to own a controlling stake in the team even after Alex sells his stake.

See Bernie Wilson, Attorney: Minority Stake of Chargers for Sale for Estate-Planning Purposes, The Canadian Press, Nov. 16, 2010.

Special thanks to Peter Parlapiano (2011 MBA/M.S. PFP candidate, Texas Tech) for bringing this to my attention.