Wills, Trusts & Estates Prof Blog

Daughter and Husband Fight During Zsa Zsa Gabor’s Final Days

Actress Zsa Zsa Gabor has been admitted into hospitals numerous times since last summer and recently was in a coma. As the actress struggles during her final days, Gabor’s only daughter and husband of twenty-five years have been continuously fighting.

Francesca Hilton, Gabor’s daughter, claims that Frederic Prinz Von Anhalt (Gabor’s current and ninth husband) will not speak to her or allow her to visit her mother. Von Anhalt maintains that he is taking impeccable care of the ailing actress and claims that Hilton is only after her mother’s life insurance.

Both individuals have persuaded Gabor to rewrite her will without telling the other party. Recently, Von Anhalt put Gabor’s house on the market for $15 million and auctioned off some of Gabor’s items. In 2005, Hilton and Von Anhalt fought in court over Gabor’s house.

Sadly, when distrust exists between a child and new spouse, this type of feud often follows the incapacitation of the parent/spouse. Even when an effective power of attorney is in place, the other party can, and often will, ask a judge to impose a guardianship to protect the parent/spouse. Seeking the advice of an experienced guardianship attorney can sometimes help conflicting parties resolve these conflicts outside of a courtroom.

See Danielle and Andy Mayoras, Family of Zsa Zsa Gabor Feuds In Actress' Final Days, Financial Planning, Jun. 27, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Most Common Malpractice Risks and Ways to Avoid Them

The most common malpractice error that attorneys commit is a failure to know or apply substantive law. However, an attorney's failure to know or apply substantive law does not account for the majority of malpractice claims. In fact, no one claim has a majority over another.

Substantive errors account for over forty-six percent of reported malpractice claims. These claims include failing to know or properly apply substantive law, failing to know or ascertain deadlines, and inadequately investigating or discovering facts. To help avoid these claims, it is important for attorneys to attend continuing legal education courses, especially when practicing outside of their usual practice areas. It is alwo important for attorneys to know their limits. For example, as I previously blogged, though an estate planning attorney may have a basic understanding of asset protection techniques, it does not qualify that attorney as an expert in asset protection.

Administrative errors make up over twenty-eight percent of reported malpractice claims. These errors include clerical and delegation errors, tickler system errors, procrastination, calendar errors, and document errors. These claims are likely the easiest to prevent as long as the attorney maintains good management skills, properly uses a tickler system, ensures that delegated work is done correctly, and keeps an updated calendar.

Client-relation errors make up over twelve percent of reported malpractice claims. These claims include failing to follow a client’s instructions, failing to obtain a client's consent, failing to keep a client informed, and providing poor communications with the client. The best way to reduce the risk of client-relation claims is to continuously communicate with clients, maintain documents that detail instructions and advice given to the client, and creatie confirmations that state what work was completed.

For more information on Malpractice Risks, see Daniel E. Pinnington, Are You At Risk? The Biggest Malpractice Claim Risks and How to Avoid Them, 36 ABA Law Practice 4 (July/August 2010).

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

American Student Writes Will in Kabul Hotel

Saiz Ahmed, an American Ph.D student studying in Kabul, spent hours huddled in his fourth-floor hotel room at the Hotel Inter-Continental while the hotel was under attack. At one point during the almost six hour ordeal, Ahmed decided to write his last will and testament.

Ahmed later recalled, “I’m sure none of us thought we were going to make it. I wrote my will—just in case.” Following Islamic law, Ahmed wrote down the charities he wished to donate to, and then placed his will in his pocket.

After spending hours in total darkness, Ahmed and the other guests were eventually rescued and safely removed from the hotel.

Prone on the floor, U.S. guest wrote his will in Kabul hotel, CCN Wire, Jun. 29, 2011.

Rhode Island State Senate Approves Civil Unions

Yesterday eveningthe Rhode Island State Senate approved a bill allowing civil unions for gay couples. The bill was fiercely opposed by gay-rights advocates who claimed the legislation was discriminatory. Rhode Island’s House of Representatives already passed the bill, and the state’s governor, Lincoln D. Chafee, has said he will likely sign the bill though he believes its religious protections are overly broad. If Chafee signs the bill, Rhode Island will join Delaware, Hawaii, Illinois, and New Jersey as the fifth state to allow civil unions for gay couples.

Under the bill, gay couples will receive the rights and benefits provided in Rhode Island to married couples, such as hospital visitation, joint bank accounts, and property transfers. However, the bill gives religious organizations the authority to not recognize gay unions. Gay rights advocates claim that this broad religious discretion would, as an example, allow a Catholic hospital to disallow a gay partner from making medical decisions on behalf of his or her partner.

Ray Sullivan, the campaign director for Marriage Equality Rhode Island, has criticized the bill for its overly broad religious protections and has stated that the civil union establishes “a second-class citizenry.”

Marriage Equality Rhode Island had planned to remain neutral on the civil unions bill but came out against it after the “draconian” religious protections were added. Most civil union and gay marriage bills offer some religious protections — allowing a minister not to perform a gay marriage ceremony if he so chooses, for example — but the Rhode Island bill goes much further, Mr. Sullivan said.

Abby Goodnough, Rhode Island Lawmakers Approve Civil Unions, The New York Times, Jun. 29, 2011.

Illinois Man Kills Family, In Part, For $1 Million in Life Insurance

Christopher Vaughn allegedly shot and killed his wife and three children in the family’s SUV on June 14, 2007. A passerby called police after seeing Vaughn injured and on the side of the road. Police on the scene found Vaughn’s wife and children murdered and Vaughn shot in the leg. Vaughn claims that his wife became ill on the way to a water park, and when Vaughn got out of the car to fix the luggage rack, she shot him.

Though his defense team claims that Vaughn’s wife shot the three children before shooting herself, evidence made public by Will County, Illinois judge Daniel Rozak may tell a different story.

Among the evidence is an article allegedly found in Vaughn’s home about staging a crime scene to look like a suicide. Evidence also shows that the night before the murders, Vaughn took the murder weapon to a firing range. Additionally, an exotic dancer’s statements, a $1 million life insurance policy on Vaughn’s wife, and posts Vaughn made online contribute to the now public evidence. If Vaughn is convicted of killing his wife and children, the state’s slayer statute will prevent him from receiving any of the life insurance proceeds.

Vaughn’s trial is currently on hold, but is expected to begin soon.

See Christopher Vaughn Had Article On Staging Murder In His Home: Accused Of Killing Wife, 3 Kids, Huffington Post, Jun. 28, 2011.

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

Man Missing For Fourteen Years Found Buried in Backyard

Authorities found a North Carolina man who had been missing for fourteen years buried in his own backyard. The man’s wife passed away last September in her living room. The Huffington Post’s coverage of this bizarre story is below:

Missing Man Found Buried in Wife's Garden

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

Carryover Basis vs. Estate Tax

Executors of estates of individuals who died in 2010 have a choice between two systems of estate taxation and asset basis determination. Executors can choose to use the current exclusion or to use the modified carryover basis.

The modified carryover basis rules allow the estate representative to increase the basis of items of property by $1.3 million. The representative cannot increase an item above its fair market value at the time of the decedent’s death, and the $1.3 million limit “is increased by the amount of the decedent’s unused capital loss carryovers and net operating loss carryovers.”

In 2010, the Tax Relief Act provided the current exclusion, setting the estate tax rate limit at 35% and creating a $5 million exemption. The act allows executors of estates of those who died in 2010 to elect to use the modified carryover basis rules instead of using the exemption. Though it seems that executors would have a relatively easy time choosing which system to use (estates over $5 million would make the election, estates under would not), many factors can complicate the decision.

For more information on deciding whether to take the election, see Justin P. Ransome, CPA, J.D. and Frances Schafer, J.D., Estate Tax or Carryover Basis? Practitioners must weigh the better option for estates of decedents who died in 2010, Journal of Accountancy, July 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.

Homeless Man Inherits a “Significant” Amount

Max Melitzer, a homeless man living in Salt Lake City, received life changing news this month—that he inherited a “significant” amount of money from his brother. Melitzer’s family hired detective David Lundberg to locate Melitzer after his brother’s death. After searching for two months, Lundberg found Melitzer in a Salt Lake City park and delivered the bittersweet news.

Though Lundberg declined to disclose the specific amount Melitzer inherited, he did state, “[Melitzer] will no longer be living on the street or in abandoned storage sheds. He’ll be able to have a normal life, and be able to have a home, provide for himself, and purchase clothing, food and health care.”

Private eye tells homeless man of inheritance, The Associated Press, Jun. 18, 2011.

Special thanks to J. Barrett Shipp (The Law Office of J. Barrett Shipp, San Antonio, Texas) for bringing this article to my attention.

Tax-Free Inheritance Using Roth IRAs

Two changes to the tax code now give investors with large 401(k) accounts the ability to give their grandchildren a tax-free inheritance of $400 million or more. Congress created this estate-tax break in two steps last year:

First Congress lifted a $100,000 income restriction on who can convert a 401(k) or IRA to a Roth IRA, allowing even the wealthiest investors to convert. Then late in the year, it raised the generation-skipping transfer tax exemption (GST) to $5 million until 2013. The exemption was previously $3.5 million, and was scheduled to drop to $1 million this year before Congress stepped in.

Converting to a Roth IRA is not for everyone though, as taxpayers must pay income taxes on assets moved to the account. Under Roth rules, assets left in the account can grow tax free, but the heir must take minimum distributions that can be stretched over a lifetime.

With the new GST exemption, the estate planning benefits that can be wrung out of a Roth are eye-popping. Consider an extreme case: A wealthy individual converts a large 401(k) account to a Roth IRA and names a grandchild as the beneficiary. The grandchild, at age 1, inherits the Roth, whose assets have grown to $5 million. Because of the new $5 million GST, the Roth assets would not be subject to estate tax or generation-skipping transfer tax.

Karen Hube, The tax law that could make your grandchildren super-rich,The Washington Post, Jun. 25, 2011.

Special thanks to Jim Hillhouse (Wealth Counsel) for bringing this article to my attention.

Incentive Trusts vs. Results Oriented Trusts

The 2011 and 2012 $5 million lifetime gift tax exemption has given many parents an incentive to transfer large amounts to their heirs now, as opposed to waiting for the probate process to begin. Some parents are funding incentive trusts as a means of ensuring that their heirs are responsible with their windfalls.

In order for beneficiaries to receive funds from an incentive trust, they must meet milestones such as graduating from school, becoming a philanthropist, or obtaining a full-time job. The trust can also promote a strong worth ethic by instructing the trustee to distribute an annual amount equal to a beneficiary’s earned income. Incentive trusts also provide the grantor an effect means of escaping estate taxes and establishing a legacy for younger generations.

These trusts may have unfortunate consequences, however. For example, a beneficiary may attempt to manipulate the system in order to receive his or her inheritance. Additionally, if the distribution is tied to salary, beneficiaries may be punished under the trust for pursing low-paying jobs like teaching or becoming stay-at-home parent.

An alternative to an incentive trust is a results-oriented trust. These trusts focus on and reward desired results as opposed to the process by which the beneficiary achieves them. The grantor can structure a results-oriented trust to focus on any goal, and the trust can define the grantor’s values. This structure allows beneficiaries to develop the skills needed to effectively manage their wealth, while at the same time giving beneficiaries the freedom to make their own life choices.

For mor information on results-oriented trusts, see Shomari Hearn, Do Incentive Trusts Encourage Responsibility?, Palisades Hudson, Jun. 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.