Wills, Trusts & Estates Prof Blog

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

Monday, January 30, 2012

Article on Intentional Interference With Inheritances

Images-2Rachel A. Orr (2012 J.D. Candidate, University of Arkansas School of Law) recently published her article entitled Intentional Interference With An Expected Inheritance: The Only Valid Expectancy For Arkansas Heirs is to Expect Nothing, 64 Ark. L. Rev. 747 (2011). The introduction to the article is below:

To date, the Arkansas legislature and Arkansas courts have not seen fit to recognize the tort of intentional interference with an expected inheritance.1 This comment argues that the tort should be recognized at common law and suggests various strategies to aid practitioners in the persuasiveness of their pleadings. If the tort is not recognized by Arkansas courts, a potential for injustice exists for heirs and beneficiaries throughout the state.
A common thread throughout any system of justice is the punishment of a wrongdoer for his misdeeds. In other words, one ought not to be allowed to profit by his own wrong.2Furthermore, it is an inherent right of every citizen to acquire, possess, and protect property, and it is the duty of the legal system to protect the weak against the strong.3 It would be difficult to imagine a group of individuals more deserving of protection than the elderly and infirm of mind. A key aspect of protecting this class of individuals is to ensure that they are able to freely dispose of their property without improper influence so that their wishes may be carried out after they are gone.4 Equity requires a system of deterrence for those who might wrongfully interfere with those wishes and a system of restitution for those who are hurt by deceitful conduct. On occasion, this may include providing protection to the heirs of the elderly during the vulnerable period after their loved ones have passed away.
*748 Imagine, for instance, a middle-aged woman with no children and a passionately charitable disposition.5 The woman drafts a will naming her parents as primary beneficiaries. She also names her descendents and a charitable organization as contingent beneficiaries. The woman is a dedicated volunteer and lifetime contributor to the charity. By her will's terms, if her family-member beneficiaries predecease her, her entire estate will pass through probate to the charity to which she has pledged both her personal time and assets during life.
Now imagine that forty years have gone by, and this same woman is now in her mid-seventies. Her parents and other named beneficiaries are deceased, but she is survived by other relatives (heirs-at-law). The same will she prepared decades earlier remains as her intended disposition in the event of her death. The woman casually meets a younger man one afternoon at a hotel swimming pool, and the two become acquainted. As this chance encounter develops, the woman learns that the man is a pastor at a local church. Though the woman has never previously been religious or sought membership with a religious group, the man convinces her to join his congregation. Later, by abusing his relationship of trust and confidence with the woman, the pastor discovers that the woman has personal assets in excess of $2 million. The pastor lavishes the woman with attention, drives her to and from church on Sunday, and lays his hands on her head to bless and heal her.
Over the course of the next few years, the pastor convinces the woman to transfer more than $1 million of her assets to him. The woman also purchases an automobile and other gifts for the pastor. After five years of membership in the new church, the pastor convinces the woman to execute a new will, naming him as the executor and primary beneficiary of her estate. The woman dies just a few years later, and the will influenced by the pastor is admitted to probate. The will bequeaths him an estate with a value of more than $2 million. The charity remains unaware of its interest in the woman's estate under her prior will.
*749 If this situation occurred in Arkansas, what legal remedies would exist for the beneficiaries to whom the woman originally intended to leave her property? What is the most equitable remedy that exists for the woman's heirs-at-law to contest any disinheritance that was prompted by an ill-willed third party? What remedy would the charity have to reclaim the property it stood to receive under the woman's prior will?
In Arkansas, the most appropriate and equitable cause of action does not yet exist.6 The charity may not learn of its interest in the woman's estate under the prior will in time to bring a will-contest action. The heirs-at-law would have standing to bring a will contest, but the decedent's estate would bear the litigation costs of defending the pastor's wrongful deeds.7 Additionally, both the charity and the woman's heirs would have an inadequate remedy in the probate court as a result of the substantial lifetime transfers that were made to the pastor. Those assets are outside of the woman's estate and, therefore, are outside of the jurisdiction of the probate court.8 By allowing all aggrieved parties the ability to bring the tort of intentional interference with an expected inheritance (the tort), the pastor will be held personally accountable for his wrongdoings, and both the heirs and the charity will be afforded an adequate remedy.
Although the decedent may not be concerned with seeking vengeance from the grave, it is the responsibility of the courts to ensure that justice remains for future generations. Though Arkansas courts have yet to recognize the tort as a cause of action,9 the following analysis will seek to promote and provide support for adoption of the tort. This analysis will *750 also hypothesize various factual scenarios that might result from the tort's recognition as a cause of action in Arkansas. These hypothetical scenarios will serve to guide practitioners in determining when the tort should be pled. This analysis will also discuss other suggestions for persuasive arguments an attorney might assert before the court when alleging the tort.

January 30, 2012 in Articles, Intestate Succession, Wills | Permalink | Comments (0) | TrackBack (0)

$7.5 Millon Lottery Claim Withdrawn

ImagesI recently blogged about the mysterious circumstances surrounding Crawford Shaw’s lottery ticket. Shaw previously submitted the ticket just two hours before it expired and identified the recipient as a corporation in Belize. The lottery was investigating how Shaw got the ticket to ensure that it was not stolen and that a valid player purchased it. Mr. Shaw had until Friday to explain how he obtained the winning ticket. Instead of offering officials an explanation though, Mr. Shaw withdrew his claim. The Iowa Lottery CEO Terry Rich has stated that the unclaimed money will go toward future prizes.

See Andrew Duffelmeyer, Lawyer Withdraws $7.5 Million Dollar Lottery Claim, Yahoo!News, Jan, 27, 2012. 

Special thanks to Professor Adam Hirsch (William & Catherine VanDercreek Professor of Law, Florida State University College of Law) for bringing the article to my attention.

January 30, 2012 in Current Events | Permalink | Comments (0) | TrackBack (0)

Elder Law Colloquium: The Aging Population, Alzheimer’s, and Other Dementias: Law and Public Policy

Advocate_Old-People-HandsAn Elder Law Colloquium,The Aging Population, Alzheimer’s, and Other Dementias: Law and Public Policy is being held at the University of Iowa College of Law during the 2012 spring semester. The Colloquium is addressing important legal and public policy issues posed by the rapidly aging population and the dramatic rise in the prevalence of Alzheimer’s and other dementias, and it is featuring nationally recognized legal and public policy experts from around the country. The thirteen weekly Colloquium sessions are being live streamed via the internet and video and podcasts of Colloquium sessions are being made available online.

Among the legal and public policy issues that the Colloquium will address are issues related to substitute, or surrogate, decision making for older persons with diminished decision-making capacity due to dementia or other causes.  There will be sessions on clinical and legal approaches   to assessment of diminished capacity, adult guardianship, health care advance planning and advance directives and powers of attorney. There also will be sessions on the impact of dementia on ability to handle everyday financial affairs and financial exploitation of the elderly, particularly those with dementia. In addition there will be sessions on the financing, organization and provision of long term care.

The website of the National Health Law and Policy Resource Center at the College of Law http://www.uiowa.edu/~law-nhlp/ has more detailed information about the Colloquium. It contains instructions for live viewing of Colloquium sessions well as information about accessing videos and podcasts of sessions. You also may contact Professor Josephine Gittler (josephine-gittler@uiowa.edu) for further information about the Colloquium.

January 30, 2012 in Conferences & CLE, Elder Law | Permalink | Comments (0) | TrackBack (0)

Estate Planning Trends

Estate plan tab blackClients’ top three reasons for seeking estate planning advice last year were (1) to avoid discord among beneficiaries, (2) to avoid probate, and (3) to protect children from mismanaging their inheritance. Clients also sought estate planning advice on asset protection for their children. In response, many firms set up safety net trusts to protect an heir’s inheritance and structured the trusts with the child’s future divorce or creditor problems in mind.

When creating estate plans, it is important to remember that nearly half the states impose separate estate or inheritance tax. The low interest rates right now make it an excellent time for clients to create a charitable-lead annuity trust to efficiently transfer wealth to younger generations. The trust provides assets to a charity for a designated period, and then the trust returns to the client or the client’s heirs. Any excess earnings of the trust pass to the beneficiaries tax-free.  

See Liz Skinner, Estate Tax Lull May Trap Wealthy, Investment News, Jan. 15, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

January 30, 2012 in Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Article on State Pension Plans

PensionDebra Brubaker Burns (2012 J.D. Candidate, University of California, Hastings College of the Law) recently published her article entitled, Too Big to Fail and Too Big to Pay: States, Their Public-Pension Bills, and the Constitution, 39 Hastings Const. L.Q. 253 (2011). The Introduction to the article is below:

Faced with the most severe budget crises since the Great Depression, many state officials and lawmakers within the United States are desperately trying to pay their bills and balance their budgets. States are anticipating significant budget deficits for the next few years, while tax receipts are slowly recovering from the steep economic downturn in 2008, unemployment rates remain high, and federal stimulus money is running out. Among the states’ mounting stacks of unpaid bills are their aggregate unfunded pension liabilities totaling from an estimated $452 billion to over $2.54 trillion,depending on what accounting discount rate is used.

State pension plans cover twenty-four million active and retired workers, about eight percent of the United States population of 309 million in 2010. When financial markets plunged in 2008, so did the assets in states’ pension systems. Beyond the current pension funding gap, some financial analysts and state officials see pension bills increasing at a rate that is unsustainable in the long run. Assuming no significant changes to the already promised pension benefits to state workers, seven states would have insufficient funds to pay those obligations past the year 2020, even with an optimistic eight-percent return on the assets of state pension systems. According to Finance Professor Joshua D. Rauh, an additional twenty states would run out of funds to cover already accrued pension benefits past 2025.This suggests that substantial contributions will be needed over the next fifteen years to pay for legacy liabilities. Meanwhile, a number of governors are trying to curtail pension and other benefits for new state employees, while financial analysts are recommending increased taxes and more severe budget cutting as necessary to bring states’ long-term obligations such as pensions in line with revenue.

The subject of a state defaulting or repudiating any type of debt has received relatively little attention in the legal literature because until recently, the legal issues concerning state defaults on debt, or in particular defaults on state pension funds, were considered too remote to attract the attention of legal scholars. Yet in recent months, more than a few economists, reporters, academicians,lawyers, and politicians are arguing about legal solutions for pension liabilities that are too big to pay, including possible federal bailouts for states that are deemed “too big to fail.”

This note presents the legal limitations that many states face if they were to default on or repudiate any of their pension obligations, and analyzes two proposed solutions to the states’ expanding pension liabilities. Section I provides general background on state pension programs and their current financial condition. Section II analyze show courts within the last few decades have interpreted states’pension obligations, paying particular attention to legal requirements under the Contract Clauses of the federal and state constitutions. Section III describes a modest proposal for a federal government bailout of state pensions through federally subsidized debt obligation bonds conditioned upon states moving from defined-benefit to defined-contribution pensions. Section IV analyzes the more radical and controversial proposal that Congress institute bankruptcy for states, using similar procedures and restrictions found in the bankruptcy code for municipalities. The conclusion suggests that courts would likely find constitutional the two proposed solutions—conditional pension obligations bonds and bankruptcy for states—although each has legal as well as practical and political issues.

January 30, 2012 in Articles, Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

State Estate Tax Changes

Taxes goldThe federal estate tax exemption was indexed for 2012, increasing the $5 million exemption to $5.12 million. Many of the twenty-three states, including Washington, D.C., that impose state estate taxes have also made changes for 2012. A list of state specific changes to estate taxes for 2012 and beyond is below:

  • To keep up with inflation, North Carolina and Rhode Island increased their exemptions to $5.12 million and $892,865, respectively.
  • Illinois increased its exemption from $2 million in 2011 to $3.5 million beginning January 1, 2012. Illinois will increase the exemption to $4 million beginning January 1, 2013.
  • Connecticut retroactively decreased its exemption from $3.5 million to $2 million. The exemption is retroactive to January 1, 2011.
  • Vermont increased its $2 million exemption in 2011 to $2.75 million for 2012 and beyond.
  • Oregon now applies its tax to any estate amount over $1 million as opposed to applying the tax to the full estate amount.
  • Ohio’s republican Governor, John Kasich, abolished Ohio’s estate tax, effective January 2, 2013.
  • New Jersey will have the lowest estate exemption once Ohio’s exemption is removed. New Jersey’s exemption is currently $675,000.
  • Maine will increase its exemption from $1 million per person to $2 million beginning on January 1, 2013.
  • Indiana, Nebraska, Oregon, and Tennessee are all undergoing efforts to repeal state levies.
  • Pennsylvania recently passed an inheritance tax exemption for farmers.

See Ashlea Ebeling, Where Not to Die in 2012, MSN Money, Jan. 23, 2012.

Special thanks to Kerry Griffin (Attorney at Law, Dallas, TX) for bringing this article to my attention. 

January 30, 2012 in Current Events, Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Top SSRN Downloads

Ssrn_2 Here are the top downloads from November 29, 2011 to January 28, 2012 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days:

Rank Downloads Paper Title
1 208 2011 Texas Estate Planning Legislative Update
Gerry W. Beyer,
Texas Tech University School of Law,
Date posted to database: November 25, 2011
Last Revised: November 25, 2011
2 202 FLP Loss, but Crummey Win
Wendy C. Gerzog,
University of Baltimore - School of Law,
Date posted to database: November 29, 2011
Last Revised: November 29, 2011
3 144 Social Security Benefits: Windfall Elimination Provision
Francine J. Lipman, James E. Williamson,
University of Nevada, Las Vegas - William S. Boyd School of Law, San Diego State University - College of Business Administration,
Date posted to database: December 1, 2011
Last Revised: December 4, 2011
4 142 From Here to Eternity: The Folly of Perpetual Trusts
Lawrence W. Waggoner,
University of Michigan at Ann Arbor - Law School - Faculty,
Date posted to database: December 22, 2011
Last Revised: January 21, 2012
5 123 Wills for Everyone: Helping Individuals Opt Out of Intestacy
Reid K. Weisbord,
Rutgers University School of Law - Newark,
Date posted to database: January 2, 2012
Last Revised: January 16, 2012
6 106 Two Cheers for the Bundle-of-Sticks Metaphor, Three Cheers for Merrill and Smith
Robert C. Ellickson,
Yale Law School,
Date posted to database: December 28, 2011
Last Revised: December 28, 2011
7 96 Trust Law as Fiduciary Governance Plus Asset Partitioning
Robert H. Sitkoff,
Harvard Law School,
Date posted to database: November 22, 2011
Last Revised: November 24, 2011
8 86 The Contribution of Fiduciary Law
Thomas P. Gallanis,
University of Iowa - College of Law,
Date posted to database: December 11, 2011
Last Revised: January 25, 2012
9 81 When You Pass on, Don't Leave the Passwords Behind: Planning for Digital Assets
Gerry W. Beyer, Naomi Cahn,
Texas Tech University School of Law, George Washington University - Law School,
Date posted to database: January 7, 2012
Last Revised: January 7, 2012
10 74 McLaughlin on Kaufman: Tax Court Protects Public Investment in Conservation Easements
Nancy A. McLaughlin,
University of Utah S.J. Quinney College of Law,
Date posted to database: November 26, 2011
Last Revised: November 26, 2011

January 30, 2012 in Articles | Permalink | Comments (0) | TrackBack (0)

Increasing Number of Elderly Inmates Causes Budgeting Problems

JailThe rising number of elderly inmates has forced many corrections systems across the nation to give serious thought to incorporating geriatric units, hospices, and medical parole. Complicating matters is the fact that state budgets are already tight, and providing medical costs for older inmates will only further tighten those budgets. Under a Supreme Court ruling, prisoners are guaranteed decent medical care. However, if the inmate lacks insurance, the state must pay the full cost.

The trend of giving long sentences without the option of parole is one of the main reasons the number of elderly inmates is increasing. In 2001, 8% of inmates (124,400 inmates) were age fifty-five or older. In 1995, the number was only 3%. Between 1995 and 2010, the oldest portion of the prison population increased at six times the rate of the overall prison population.

Prisons must now decide whether to install grab bars and handicap toilets in cells, how to best accommodate prisoners in wheelchairs, and what to do when an inmate can no longer understand instructions. Some states have begun addressing these needs. Washington state opened an assisted living facility in 2010 at one of its prison complexes. Louisiana State Penitentiary has incorporated a hospice program for over a decade.  

Corrections systems that have yet to implement special accommodations for aging prisoners face the problem that their health care staff lack expertise in elder care. Many states have implemented early release programs aimed at elderly inmates who are believed to pose little threat to public safety.

See David Crary, Prison Dilemma: Surging Numbers of Older Inmates, The Associated Press, Jan. 27, 2012. 

January 30, 2012 in Current Events, Elder Law | Permalink | Comments (0) | TrackBack (0)

Sunday, January 29, 2012

Romney's Tax Return -- Paid More Than He Owed But Still Paid Minimal Taxes

Images-6The New York Times sees Romney’s tax return as a sign of how dysfunctional our tax system has become with all of the loopholes. Romney paid a smaller percentage of his income than most Americans pay in taxes, but it still appears he overpaid taxes on capital gains.

Despite this overcalculation, Romney’s tax team managed to keep his taxes abnormally low. Tax strategists used grantor trusts, foreign tax credits, and carried interests. One fortunate connection with Goldman Sachs produced a large amount of gains for Romney trusts. When Goldman Sachs went public in 1999, because Romney knew him, he was privy to information that allowed him to buy stocks at a low offering price early. Ultimately, Romney’s investment has led to $750,000 in capital gains.

See Floyed Norris, Romney Paid More Than He Owed, The New York Times, Jan. 26, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

January 29, 2012 in Current Events, Income Tax, Trusts | Permalink | Comments (1) | TrackBack (0)

Tax on Shipwreck

Images-5The Costa unit of Carnival Cruises has offered uninjured passengers the equivalent of $14,460 each to compensate for lost baggage and the trauma from the incident. Even though the accident happened in Italy, every U.S. citizen and permanent resident has to report worldwide income. Any gains from the settlement will likely be considered income because the definition of "income" is very broad. If a passenger's belongings were worth more than the $14,000 compensation, then the passenger should be able to cover his/her basis and then claim a casualty loss for whatever the diffrence is between the value of his/her belongings and the settlement. There are potential problems with proving the value of items, but it is possible to claim a loss. Damages for physical injuries are tax-free, but emotional injuries are not clearly tax-free. Since this settlement only addresses lost baggage and trauma from the accident, it will likely be taxable. 

See Robert W. Wood, IRS To Collect on Italian Cruise Ship Settlements, Forbes, Jan. 28, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing  (PLM, Inc.)) for bringing this article to my attention. 

January 29, 2012 in Current Events, Income Tax | Permalink | Comments (1) | TrackBack (0)