Wills, Trusts & Estates Prof Blog

Judge Revokes Widow's Sentence for Tax Evasion

79-year-old millionaire, Mary Curran pleaded guilty for tax evasion and was sentenced to one year of probation in federal court. However, the judge immediately revoked the sentence. Reports allege that the judge suggested that the prosecution was unnecessary. Originally, Curran faced up to six years in prison plus one year of probation and a fine. Curran had not paid income tax on her $43 million dollars in an offshore account. As a result, she faced prosecution for tax evasion. Nonetheless, Curran did file a voluntary disclosure with the IRS. In spite of this, the disclosure came too late. The Department of Justice had started an investigation, which precluded her from the voluntary disclosure program. Curran has agreed to pay roughly 21.7 million dollars as a penalty. 

See Alistar M. Nevius, Widow Avoids Jail Time and Probation in Sentencing for Offshore Account Tax Evasion, American Institute of CPAs, Apr. 26, 2013.

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

T.J. Jackson Awarded Financial Support

As I have previously discussed, T.J. Jackson filed a motion with a court asking for a reasonable amount of financial compensation for taking care of Jackson's children temporarily. Now, a California judge has approved the motion and held that T.J. should receive financial compensation for taking care of Jackson's children. A judge approved his request to receive $9,000 a month in parental support. The judge reasoned that this was appropriate because the services that T.J. provides are beneficial to the children and "'...it is in their best interests that he continue to do so.'"

See Michael Jackson - T.j. Michael Jackson Awarded Financial Support As Co-guardian of King of Pop's Kids, Contact Music, Apr. 19, 2013.

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

State of New York To Escheat $40 Million From An Estate

Of the 2.5 million people who died intestate in 2012 one of them was real estate developer Roman Blum, whose estate "was worth almost $40 million when he passed away in January 2012 at the age of 97." The state conducted a worldwide search for his heirs but the search turned up to no living relatives. If no relatives come forward in the next three years, all the money in his estate will escheat to the State of New York. There are several estate planning lessons that emerge from Blum's estate:

1. A person might want to provide for their loved ones not just their relatives. There must have been people who Blum cared about and a will would have given him the opportunity to bequeath property to them. Unfortunately, without a will or trust there is no way to legally enforce Blum's wishes. If a person dies without a will, the state follows its intestacy statute to determine who should receive Blum's estate.
2. A person might want to review his or her beneficiary forms to ensure his or her primary and secondary designations are correct and up to date.
3. Furthermore, assuming Blum did not want to benefit anyone, he still might have wanted to benefit a charity. If Blum had written a will, he could have donated his estate to a worthy cause.
4. Estate planning documents are not only for the benefit of our family members and loved ones after our deaths, they can also be necessary to safeguard our wishes during medical hardships in our life. Advance directives, which allow a person to express their wishes about end-of-life care, and health care proxies, which allow a person to designate a person to make medical decisions on a person's behalf if the person cannot, are both necessary estate planning documents.
5. Additionally, a person who creates estate planning documents might want to make their documents accessible so that family members or the executor of the estate knows where to find them. 
6. Finally, it is important to not procrastinate about making these important documents.

See Deborah L. Jacobs, N.Y. State Could Get $40 Million From Man Who Died Without A Will, Forbes, Apr. 28, 2013.

Article on Physician Assisted Suicide in Massachusetts

Stephen J. Orlando (J.D. Candidate 2013, Suffolk University Law School) recently published an article entitled, The Doctor Will See You For The Last Time Now: Physician-Assisted Suicide In Massachusetts, 46 Suffolk U.L. Rev. 243 (2013). Provided below is the introduction to his article:

Under early common law, many states punished assisted suicide as murder. In 1994, however, the Supreme Court of Michigan drew a legal distinction between the concepts of murder and assisted suicide. Despite this distinction, forty-seven states still prohibit physicians from assisting in a patient’s death. The justifications for this restriction include avoiding the possibility of abuse, preventing the risk of a slippery slope to involuntary euthanasia, or preserving the integrity of the medical profession. The three states that allow the practice view physician-assisted suicide (P.A.S.) as a means of promoting patient autonomy and providing a merciful end-of-life option for terminally ill patients.

Presently, Massachusetts is in line with the majority of states in prohibiting P.A.S. In September 2011, Attorney General Martha Coakley certified an initiative petition to legalize physician-assisted suicide. The bill, known as the Massachusetts Death with Dignity Act (DWDA), would have allowed terminally ill patients to request and receive lethal dosages of medication to end their own lives. Voters narrowly rejected the bill during the 2012 general election.

This Note will focus on the effects that a bill like the proposed DWDA might have on patient care in Massachusetts. Specifically, this Note focuses on the effect of legalized physician-assisted suicide on patient autonomy, elder care, and the dignity of the medical profession. This Note also discusses the potential future of end-of-life care, including active euthanasia and the availability of physician-assisted suicide to minors.

Article on the Oregon Trust Deed Act

Joseph L. Dunne (Attorney, Vial Fotheringham, LLP) recently published his article entitled, Enforcing the Oregon Trust Deed Act, 49 Willamette L. Rev. 77 (2012).  The introduction to the article is available below:

In the real estate world, the years leading up to the 2008 financial crisis were characterized by massive financial irresponsibility exacerbated by a regulation vacuum. The nation's biggest financial institutions securitized millions of loosely underwritten home loans into mortgaged-backed securities and sold them to unknowing investors. The result, now widely recognized, was the overnight collapse of AAA-rated portfolios collateralized with toxic subprime loans. As of March 2012, nearly 20% of all Oregon homeowners were under water on their mortgages.

For most of the last five decades, real estate lenders have diligently complied with Oregon's statutory requirements for nonjudicial foreclosure. Traditionally, every time a home loan was sold on the secondary mortgage market, lenders recorded a deed of trust assignment in the local county records.  This practice guaranteed a complete legal chain of title at the time of foreclosure - making nonjudicial foreclosure a quick, reliable enforcement method without the need for judicial oversight. Oregon's nonjudicial foreclosure regime theoretically encourages lending to less-qualified credit applicants by ensuring a more cost-effective remedy upon default. Since their creation in 1959, nonjudicial foreclosures have been the predominant method for foreclosing real property in Oregon.

Widespread changes in mortgage banking practices during the housing boom undercut this once-reliable foreclosure method. Once mortgage bankers and Wall Street financiers realized the enormous profit potential in the secondary market for home loans, mortgage securitization by private investment banks intensified. As the market for home loans burgeoned and Americans increasingly signed up for home ownership, the mortgage banking industry collectively decided the decades-old practice of recording assignments each time a loan was sold was too expensive and paperwork intensive. They developed an electronic database named "Mortgage Electronic Registration Systems, Inc." (MERS) to save time and money in the securitization process.  An estimated 60% of all current U.S. home mortgages were sold on the secondary market using MERS, but as housing prices continued to skyrocket the legal issues surrounding MERS and mortgage securitization remained unnoticed. The eventual collapse of the housing bubble exposed the legal problems with MERS and mortgage securitization. Mortgage lenders soon found themselves in the middle of a foreclosure crisis.

The Oregon Trust Deed Act (OTDA) requires lenders to record all deed of trust assignments before initiating nonjudicial foreclosures. Lenders have difficulty complying with this requirement because of their dependence on the MERS private recording system. Over the last several years, an increasing number of Oregon homeowners have challenged the legality of their pending nonjudicial foreclosures. Their claims for wrongful foreclosure stem from two basic arguments: (1) MERS cannot be a beneficiary under a deed of trust in Oregon because MERS does not meet the statutory definition of a beneficiary found at section 86.705(2) of the Oregon Revised Statutes, and (2) unrecorded assignments of their deed of trust prohibit the nonjudicial foreclosure remedy under section 86.735(1).

These issues have divided circuit and district court judges in Oregon, resulting in a number of conflicting opinions. On April 6, 2012, Federal District Court Chief Judge Ann Aiken certified four questions to the Oregon Supreme Court stemming from four wrongful foreclosure cases pending before her Court. On July 18, 2012, the Oregon Court of Appeals ruled against MERS in Niday v. GMAC Mortgage, LLC, finding that MERS does not meet the statutory definition of a beneficiary, and cannot be used to circumvent the OTDA recording requirement. The following day, the Oregon Supreme Court accepted the four certified questions from the District Court. Oral arguments are currently scheduled for January 8, 2013, although a final decision may not be rendered until the following summer. Until then, in the wake of Niday and recent legislation requiring pre-foreclosure mediation, lenders appear reluctant to pursue any nonjudicial foreclosures in Oregon.  For the time being, the entire foreclosure industry in Oregon has been forced to switch to judicial foreclosures as the state's High Court is now poised to weigh in on Oregon's nonjudicial process and the legislature scrambles to come up with a solution.

This article explains how the use of MERS as a named beneficiary violates the procedural requirements for foreclosure under the Oregon Trust Deed Act. This article further examines the implications of MERS's inability to serve as the beneficiary, concluding that, although MERS cannot be a beneficiary, MERS may likely serve as an agent of the initial and successive beneficiaries. In its agency capacity, MERS and its principals may comply with Oregon's procedures for nonjudicial foreclosure by recording all assignments of the deed of trust prior to initiating nonjudicial foreclosures.

New Case: In re Estate of Honse

Beneficiary of specific property sold by conservator is entitled to proceeds remaining at the settlor’s death.  The settlors created a revocable trust to terminate on their deaths and the successor trustee was to distribute specific real property to their son, other specific property to their daughters, and the remainder to the daughters.  After the father’s death, the mother’s conservator sold the real property given to son under a court order to obtain funds to pay for the mother’s care.  At the time of the mother’s death, the trust held only cash.  The trial court ordered the cash distributed to the daughters under the clause disposing of the remainder of the trust property.  The son appealed and the intermediate appellate court reversed, holding that the sale by the conservator adeemed the specific gift only to the extent the proceeds of the sale were used to support the settlor and that the son was entitled to the balance of the cash that could be traced to the sale of the property specifically given to him. 

See In re Estate of Honse, No. SD 31853, 2013 WL 394708 (Mo. Ct. App. Feb. 1, 2013).

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

Digital Asset Protection Post Mortem

As I have previously discussed, many people are realizing the difficulties with digital asset management after death. It is wise to include any on-line presence in the estate planning process. Not doing so may make you vulnerable to identity theft after your death. Additionally, it may cause challenges in settling debts and recovering family photos or momentos. Moreover, some digital assets hold value such as domain names and music libraries. Each on-line provider has terms and restrictions that may challenge executors or heirs who are trying to settle debts. Some providers have a process to give relatives access, but it is usually long and requires a court order. Another obstacle that planners face is the federal law. Using relative's passwords may be against the law depending on the jurisdiction. It might be a good idea to make a list of all your on-line accounts with your login and password information and keep it in a safety deposit box.

See Eleanor Laise, Protect Digital Assets After Your Death, Kiplinger, May 2013.

Bad Planning the FAPT Case

As I have previously discussed, problems have emerged for Arline Grant, whose husband established two Foreign Asset Protection Trusts to shield their assets from creditors. These trusts are usually established with a foreign trustee for the benefit of a United States grantor and their family members. Typically within this scheme, the trustee has discretion over the distributions that it gives to the beneficiaries. The grantor of the trust, however, usually retains the discretion to alter the trustee. This is usually how the grantor retains control over the trust. Current events have shown us that this scheme might lead to some unfortunate consequences. These consequences are a direct result of poor estate planning.

In United States v. Grant, a federal district court in the Southern District of Florida has ordered Arline Grant to exercise her authority to alter the trustee in this case. Before the court order, the trustee was a foreign corporation and therefore outside of the jurisdiction of the federal courts. The court has ordered her to replace the foreign trustee with a U.S. trustee to ensure that the trust would be within the reach of the jurisdiction of the courts. Now, the assets of the trust are reachable by the courts, which was contrary to the whole purpose of creating the trust. There are two points that should be taken away from this case. First, it might have been a better idea for the trust to limit who can be replaced as the trustee based on jurisdiction limitations. Second, it is never a good idea place assets that are outside the reach of the IRS. Often times, this can lead to criminal liability.

See Charles Rubin, Bad Planning In Foreign Asset Protection Trust Scenario, Rubin On Tax, Apr. 26, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

CLE on International Trust and Estate Planning

The ALI-CLE is sponsoring a live course/telephone seminar entitled, International Trust and Estate Planning, from Thursday October 10, 2013 to Friday October 11, 2013 at the Revere Hotel Boston Common in Massaschusetts. Provided below is description of the event:

In the course of more than 14 hours of instruction, the tax and reporting rules relating to foreign trusts and trusts established by foreign grantors are discussed in depth, as are the regulations and procedures implementing them. The complementary tax regimes affecting foreign corporations with U.S. shareholders also are examined. New this year is a segment on international philanthropy analyzing taxation of direct gifts to overseas recipients as well as a session on unique estate planning concerns for Canadian clients.

Other topics include:

• Income, gift, and estate taxation of nonresident aliens after the 2010 legislation;
• Marital planning for the non-citizen spouse;
• Recent developments with voluntary disclosure of offshore financial accounts;
• The opportunities and pitfalls of expatriation after the 2008 HEART Act changes; and
• U.S. immigration and nationality concerns relevant to high-net-wealth persons moving to and from the United States;
• “Inbound” and “outbound” grantor trusts

As in prior years, time is devoted to a discussion of the practical and ethical issues that arise in dealing with international clients in an increasingly regulated world. Time is reserved throughout the program to address registrants’ questions.

Article on the 2010 MIPPA Legislation

Robert S. Bloink (Visiting Assistant Professor of Law, University of South Dakota Law School) recently published an article entitled, Putting Boomers to Pasture: Does the 2010 MIPPA Legislation Reinforce the Nursing Home Bias?, 33 Pace L. Rev. 152 (Winter 2013). Provided below is the introduction to his article:

Unfunded health related costs are the greatest financial uncertainty facing the baby boom generation as they enter retirement years. The vast majority of those costs will relate to home and institutional based health care services provided in the last months of their lives. When presented with the choice of receiving such end-of-life care in a home based setting versus an institutionalized setting, almost every senior will opt for home based care. Prior to 2010, the Medigap at-home recovery benefit covered expenditures incurred in connection with in-home skilled medical care covered by a Medicare policy, such as personal care services that many seniors require in order to avoid a nursing home stay. The at-home recovery benefit was eliminated by the Medicare Improvements for Patients and Providers Act (“MIPPA”) in 2010. The Supreme Court took a decidedly different approach regarding access to home based health care options for this Medicaid-eligible senior population in Olmstead v. L.C. ex rel Zimring. The Olmstead decision acknowledged the long standing bias toward providing end-of-life health care services in an institutionalized setting, typically a nursing home, and, in an effort to have more of these Medicaid services provided in-home, required that “public entit[ies] . . . administer . . . programs . . . in the most integrated setting appropriate to the needs of qualified individuals with disabilities." Through this “integrated care” mandate, the Supreme Court recognized that the unjustified segregation of poor seniors in institutions was discrimination and that home and community based services (“HCBS”) care options must be provided where appropriate and reasonable in light of the patient’s needs. However, it is the engrained nursing home bias that non-Medicaid-eligible middle class boomers are likely to fall victim to, despite their stated intentions to the contrary.

Because administering end-of-life care in a nursing home setting has become the default in the United States, today current retirees who fail to make affirmative decisions about how and where their end-of-life care will be administered will have little choice but to receive long-term care in an institutional setting. Failure to affirmatively engage in planning for end-of-life care choices is often simply a byproduct of limited information and even less professional guidance available regarding such decisions. This article seeks to explore what lessons can be learned from how Medicaid end-of-life health care services are provided to the poor post-Olmstead, and how these lessons can be applied to middle class and upper middle class boomers. The article equally seeks to address how such lessons can be integrated into a meaningful dialogue with retiring boomers in a fashion that encourages discussion and decisions regarding end-of-life health care, as opposed to leaving such tough calls for surviving adult children.

To this end, Part II of this article begins by examining the hurdles seniors face in accessing HCBS after the defunding of the Medigap at-home recovery option in 2010, taking into account the difficulties involved in planning for long-term care that are caused by significant cost variances depending on the community in which the care is provided. This section further explores the impact of informal care provided by family members on the cost and effectiveness of long-term care performed in the home.

Part III provides a summary of the historical background of long-term care in the United States and explores the genesis and perpetuation of the bias toward providing end-of-life care in an institutional setting, despite the high costs of nursing home care, leading up to the integrated care mandate handed down by the Supreme Court in Olmstead. In Part IV, the varying degrees to which states have implemented the Olmstead mandate are examined to provide an empirical analysis of the cost-savings and reduction in nursing home admission rates that can be realized through effective and widespread implementation of HCBS programs. Spending on long-term care in states with underdeveloped HCBS programs is compared to expenditures in states offering comprehensive programs to determine the overall effect of increasing access to HCBS.

Part V identifies the planning gap that exists because of the reluctance of both advisors and clients to discuss end-of-life care. This section recognizes the often-conflicting motivations of financial advisors and attorneys, as well as the disinclination of clients toward discussing the end of their lives, both of which can lead to a joint failure to develop effective strategies for funding end-of-life care.

Part VI aims to encourage advisors and clients to ignite the dialogue on end-of-life planning. It discusses the possible imposition of filial responsibility upon adult children for the long-term care expenses of their elderly parents and suggests that selective enforcement of filial support statutes could promote financial preparedness among baby boomer retirees. This section also raises the notion that fiduciary liability may be a motivating force that could persuade advisors to initiate the planning dialogue. With both sides motivated to engage in fulsome planning for end-of-life choices, this article hypothesizes that this planning dialogue can be transformed from one that advisors avoid and clients recoil from into a conversation that imparts a message of empowerment and hope among seniors who can develop the tools necessary to control the course of their own end-of-life care.