Wills, Trusts & Estates Prof Blog

Hong Kong Billionaire Demonstrates How to Successfully Plan for Succession

Fong Yun Wah, the 88-year-old billionaire ranked No. 21 on the Forbes Hong Kong Rich List, has quietly implemented the succession of his property investment company, Hip Shing Hong, in a place where succession plans don’t always work out.

Yun Wah has handed off much of the management of the Hong Kong family-controlled business to his 55-year-old son, David.  Part of this successful succession was the “incremental additions of responsibility by the father to the son and careful attention to unspoken signals between the son and father.”

When it was time for David to take care of the family business, he noticed that business was good, but the company was outdated.  His father let him implement his own business plans without talking too much about succession strategy.  The father would only correct his son if he sensed he was heading in the wrong direction.

Yun Wah was also willing to discuss what should happen upon his death, an uneasy subject in their culture.  Because of his openness, there is a rough framework for how his wealth will be distributed as well as a framework for the management of Hip Shing Hong going forward. 

See Russell Flannery, One Hong Kong Billionaire’s Succession Approach: Skip the “Blah, Blah, Blah”, Forbes, May 27, 2013.

National Enquirer Heir Arrested

Paul Pope, son of the founder of the National Enquirer, was arrested at a Florida motel for allegedly stalking his mother, Lois Pope.  The two have a tumultuous past, frequently feuding over money issues in and out of court.

After the death of Generoso Pope, Paul Pope and his mother became the beneficiaries of the National Enquirer founder's multi-million dollar estate.  After the sale of the tabloid, Lois Pope received $200 million dollars, while Paul received $20 million. Lois and Paul’s relationship became strained when he allegedly began to demand more money.

Prior to this incident, Lois Pope filed an order of protection against her son. She stated that he “‘maliciously and repeatedly harassed (her) with cruel behavior (that) is causing (her) to suffer substantial emotional distress and to genuinely fear for her safety.’”

See Tina Moore, National Enquirer Heirs Still Squabbling as Paul Pope is Arrested, New York Daily News, May 12, 2013.

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

Gandhi’s Final Will Missing

As I have previously discussed, Gandhi’s “last” will and testament, handwritten and signed in 1921, was recently auctioned off in England.  But experts say Gandhi made up to four wills, the final one being handwritten and signed in 1940. 

The original 1940 will entrusted to the Navajivan Trust can not be located, but a true copy of the typed text is available in the Trust’s records.  A trustee of the Navajivan Trust said the original may have been left at the courthouse when probated or it may be lost in the Trust’s vast records.

Gandhi named his personal secretary, Mahadev Desai, and a Navajivan trustee as executors of his two-page will.

See Jumana Shah, Where’s Mahatma Gandhi’s Final Will?, DNA India, May 26, 2013.

Article on Marshall v. Commissioner

Eric Bennett Rasmusen (Indiana University Bloomington) recently published an article entitled, The Meaning of 'Value' for Gift and Estate Tax Donee Limitations in Tax Code 26 U.S.C. § 6324(B): An Amicus Brief for Marshall v. Commissioner, Wills, Trusts, & Estates Law eJournal, Vol. 9, No. 15 (May 30, 2013).  Provided below is the abstract from SSRN:

In 1995, J. Howard Marshall II made a gift to Elaine Marshall worth some $43 million at the time of transfer. The IRS assessed gift tax against his estate, which failed to pay. In 2008 the IRS assessed gift tax of $74 million against donee Elaine Marshall, which exceeds $43 million because of the interest accumulated since 1995 but is less than the $81 million the gift would compound to at 5% per year. Does the limitation on donee liability to “the value” of the gift imposed by 26 U.S.C. § 6324(b) mean to “the original amount of the gift”, or to “the value of the gift at the time of eventual tax payment”? The appellate courts are split on this. That is the issue in Marshall v. Commissioner, which is now before the 5th Circuit. This paper is an amicus brief in that case and, I hope, a good example of how economics can inform and simplify law.

New Developments With 501(c)(4) Debate

The heated debate regarding the IRS' treatment of Section 501(c)(4) exemption applications has gained more attention. Recently, a nonprofit filed a claim asserting that its 501(c)(4) application was purposely not processed to cause undue delay. Another organization is challenging the 501(c)(4) regulations. The Senate Finance Committee held a hearing in which IRS commissioner Steven Miller, and former commissioner provided testimony on the matters. The House also held a hearing, which contained testimony that the Treasury was not involved in the allegations and have cooperated with the investigation. However, Director Lois G. Lerner asserted her Fifth Amendment right and refused to testify. 

See Further Developments in the 501(c)(4) Controversy, Charitable Planning, May 24, 2013.

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

Few States Offer Asset Protection Trusts

A few state legislatures have constructed asset protection trust statutes that permit a grantor to create a trust that is shielded from the grantor’s creditors even though the grantor is be a beneficiary.The states with these statues include Nevada, Alaska, and Delaware. For people not living in those states the creation of a trust will probably not be effective for asset protection. One possible loophole is the Full Faith and Credit Clause. This may allow for the enforcement of a judgment against the trust assets in another state. The Restatement 2nd has a Conflict of Laws provision which indicates that so long as there is a substantial relation to the trust the law of that state can be upheld. Where the trust was created provides a substantial relation sufficient to use that location’s law.

See Charles Rubin, A Not So Good Domestic Asset Protection Trust Case, Rubin On Tax, May 23, 2013.

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

Discovery Abuse Leads To Paying Sanctions

Anna Nicole Smith’s daughter, Dannielynn has recently been granted a monetary award as high as $49 million dollars against J. Pierce Marshall’s estate. A California federal judge ruled against the estate of J. Pierce Marshall and ordered the estate to pay sanctions because of “massive discovery abuse” in the Koch Industries heir’s legal dispute with Anna Nicole Smith. The court explained that Marshall’s son Pierce, caused undue delay by not providing important documents to Smith’s lawyers. This legal battle has dragged on for over ten years, and has now halted any counterclaim. The dispute stemmed from Smith’s action to collect from her deceased husband, J. Howard Marshall II’s estate. Marshall was a 16% partner in Koch Industries, an industry worth billions when Marshall passed. 

See Daniel Fisher, Anna Nicole Smith's Daughter Wins Sanctions From Marshall Estate, Forbes, May 30, 2013.

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

Article About Valuing Fractional Interest In Art For Tax Purposes

Wendy C. Gerzog, (Professor of Law, University of Baltimore School of Law) recently published an article entitled, Valuing Fractional Interests in Art for Estate Tax Purposes, (May 30, 2013). Tax Notes, Vol.139, No.9, 2013. Provided below is the abstract from SSRN: 

It is difficult to value fractional interests in art because there is virtually no market in those interests. Nevertheless, the Tax Court in Estate of Elkins valued the decedent’s fractional interests in multiple artworks, which the decedent and his children highly cherished. First, the court addressed the restricted agreements under section 2703 and then the court determined the value of decedent’s interests in the art.

Insurers Stepping Up Efforts to Find Life Insurance Beneficiaries

Beneficiaries of forgotten life insurance policies are suddenly beginning to receive checks in the mail.  What might seem to many like a scam is actually an increased effort by major life insurers to determine if policyholders have died and to locate their beneficiaries. 

In response to an investigation, Nationwide started this trend by striking a $7.2 million deal with seven states regarding enormous amounts of money in unclaimed benefits.  Other insurers like Metlife, Prudential, and John Hancock have followed suit with similar agreements.

Life insurance policies generally require the beneficiaries to notify the insurer when the policyholder dies, but the new agreements have insurers take more initiative to find beneficiaries.  Nationwide has since paid out about 3,000 of the 4,000 old policies they had identified.  The average benefit is around $2,000.

See Mark Williams, Insurers Finding Beneficiaries of Forgotten Life Insurance Policies, The Columbus Dispatch, May 26, 2013.

Georgia Investment Adviser Misappropriates $2 Million from Widows

Blake B. Richards, a 36-year-old investment adviser from Buford, Georgia, allegedly "misappropriate[d] approximately $2 million from at least six individuals" according to a claim brought forth by the SEC.

Beginning in 2008, the SEC claims that Richards formulated several fraudulent schemes to embezzle money from clients, including two elderly victims who were attempting to roll over their retirement accounts.

Working under a separate company registered to his name, Richards allegedly had his clients write checks out to "Blake Richards Investments" or "BMO Investments" and would keep the money for himself. In one instance, Richards classified himself as an “Accredited Asset Management Specialist,” which was completely false.

Most of the money stolen consisted of retirement or life insurance proceeds from the victims’ deceased spouses. As a result, the SEC seeks to have "his assets frozen, disgorgement, penalties and an injunction."

See SEC Says Adviser Stole From Widows, Courthouse News Service, May 24, 2013.