Wills, Trusts & Estates Prof Blog

Drafting a Trust Amidst Divorce

While marriage can be wonderful, it can also be difficult.  Unfortunately, some couples encounter hurdles in their relationship from which they may never recover. 

Regardless as to whether the split is acrimonious or harmonious, leaving trust assets on the table during negotiations can enable the parties to make beneficial deals that will protect family business interests or other assets from division.  The goal should be to plan for divorce with flexibility to maximize a divorcing couple’s options, while also protecting what divorcing settlors would want. 

A big concern is that the settlor in the divorce action will not want their spouse to automatically continue as trustee or beneficiary with no safeguards.  A refined solution involves two provisions: First, upon the filing of a divorce action, the trust instrument default should automatically remove the spouse as trustee appointer and trustee remover only.  That way, a successor in line can remove the spouse as trustee if that’s desired.  The spouse can also remain as fiduciary if appropriate.  Second, someone should be empowered in the instrument to exercise a power to add or remove beneficiaries like a divorced spouse.  This combined approach can achieve all that most divorcing clients would want without limiting flexibility for the minority of clients whose divorce wishes may be atypical.

See Kim Kamin, Planning for Divorce When Drafting a Trust, Wealth Management, Feb. 27, 2015.

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

Court Halts Proceedings in James Brown Estate

I have previously discussed the ongoing estate battle between soul singer James Brown, and his alleged wife Tommie Rae Hynie.  The South Carolina Supreme Court has now ordered Aiken County court officials to stop all proceedings in the cases regarding Brown’s estate.  The order told the Aiken County Clerk to give the high court all orders issued in any action related to the James Brown estate and the marital status of Brown and Hynie. 

This order could indicate that the South Carolina Supreme Court wants to reevaluate the case, as there are many questions that need to be answered.  Yet, the lawyer for Brown’s family said the order “puts the whole case in limbo and stops everything in its tracks until the Supreme Court gives direction.”  The legal dispute has also put Brown’s foundation on hold, which was supposed to provide education to poor children in South Carolina and Georgia. 

See The Associated Press, SC Supreme Court Freezes James Brown Estate Case, The State, Feb. 26, 2015.

IRA Match Program

In an attempt to entice new customers, Fidelity has begun offering contribution matching for customers that transfer an existing IRA to Fidelity. The incentive program works by matching a percentage of the account contributions made for the three years after the account is transferred. The percentage depends on the amount in the account when it is transferred.

See Ashlea Ebeling, A New Reason to Fund an IRA: The IRA Match, Forbes, Feb. 26, 2015.

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

Rights and Obligations of Sperm Donors for Same-Sex Couples

Recent case involving sperm donors for lesbian couples gaining visitation rights and being ordered by courts to pay child support raises important legal questions on the current law involving rights of donors and paternity presumptions.

It can be difficult for couples that acquire the help of a sperm donor to birth children to keep the donor out of the child's life if strict procedures, such as going through a sperm bank, are not followed, which can be very expensive. Even lesbian couple's in states that recognize their union, face additional difficulty than opposite-sex married couples due to the presumption of paternity not being applied to either female parent. However, California has interpreted its paternity presumption broadly and has allowed the presumption to attach to one member of a same-sex couple.

See John Culhane, Sperm Donors are Winning Visitation Rights, Slate, Feb. 20, 2015.

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

Doctors Chosen to Examine Tom Benson

A three-doctor panel has been selected to determine the mental fitness of Saints and Pelicans owner Tom Benson.  The court has not released the names of the doctors, and the judge said that all of the information surrounding the exam would be confidential. 

The judge previously stated that each side would select a physician for the exam, with the two sides jointly agreeing on a third doctor.  The exam ordered is less invasive than the heirs had originally sought 

The doctors are scheduled to examine Benson in mid-March and a report will be filed with the court shortly thereafter. 

See Doctors Selected for Benson’s Exam, WWLTV, Feb. 26, 2015.

Auctioning Bequest Creates Controversy for Gordon College

When a wealthy family bequeathed a collection of rare Bibles and Shakespeare folios to Gordon College in 1922, there was one caveat: the works must remain with the school. 

When a descendant of the late collector Edward Payson Vining learned that Gordon plans to auction off ten percent of the 7,000 volumes, he was shocked.  “I know [Vining] would want the books to be there,” said Vining’s great-granddaughter, Sandra Webber. 

The planned sale has spread unease among the campus, leading some faculty to question the leadership of the college’s president, D. Michael Lindsay.  The administration was left out of the decision to auction off the works.  Yet, some administrators say that selling a portion of the collection is necessary to afford preserving the rest of the books.

Meanwhile, the collection is listed in a full-color advertisement of the auction house Doyle New York.  The auction has been scheduled for April, but the college postponed it until the fall.

See Laura Krantz, Gordon College’s Bid to Auction Books Creates Uproar, Boston Globe, Feb. 26, 2015.

Elizabeth Taylor's Diamond Dispute

The estate of Elizabeth Taylor is currently in a dispute with Christie’s auction house over the actress’s heart-shaped “Taj Mahal” diamond, which is set inside a ruby border of a pendant given to Taylor by then-husband Richard Burton in 1972 for her 40^th birthday. 

In 2011, the auction house sold the piece of jewelry for $8.8 million to an anonymous buyer following Taylor’s death.  The buyer demanded the sale be canceled months later based on the belief that the stone was not from the Mughal period.  According to the lawsuit filed by trustees of Taylor’s estate, Christie’s canceled the sale even though the auction house never guaranteed the age of the diamond, only that it was of Indian origin. 

Court documents indicate that Christie’s had demanded the trustees return more than $7 million it received from the sale, while the trustees allege Christie’s violated its agreement to auction off the estate and did so only to keep relations with a “VIP customer.”  The trustees further claim they have not received money for other items that were auctioned.  All proceeds from the auction went to the Elizabeth Taylor AIDS Foundation.

See Taryn Ryder, Elizabeth Taylor’s $8 Million Diamond Drama, Yahoo, Feb. 26, 2015.

L'Oreal Heiress Takes Center Stage in Courtroom Battle

Liliane Bettencourt, the 92-year-old heir to the L’Oreal cosmetics fortune, is at the center of a courtroom battle in southwestern France, where prosecutors and defense lawyers paint vastly different portraits of Ms. Bettencourt. 

The case is the universal story of any wealth family with an elderly relative who fluctuates between independence and vulnerability.  Prosecutors allege that her age, the beginnings of dementia, and a daily medical regimen of 56 pills, invited exploitation.  So when French photographer, Francois-Marie Banier gained the largest share of her fortune ($1.13 billion), eyebrows raised.  “Liliane wanted to do things for me, to ease my life,” testified the photographer, who is facing three years in prison.  Mr. Banier’s lawyers argued that Mrs. Bettencourt made calculated choices and challenged the notion she was showing signs of dementia when she gave away lavish gifts. 

Also on trial are Mr. Banier’s friend, Martin d’Orgeval, Patrice de Maistre, and Jean-Michel Normand.  The list also includes a lawyer, a businessman, the former manager of Mrs. Bettencourt’s private island and her onetime nurse, Alain Thurin.  Investigators say they believe the amount of money taken from Mrs. Bettencourt totals more than €1 billion from a variety of schemes. 

The trial ended on Wednesday, and a panel of judges said it would announce its verdict on May 28. 

See Doreen Carvajal, In Case of L’Oreal Heiress, a Private World of Wealth Becomes Public, The New York Times, Feb. 25, 2015.

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

New York Takes Aggressive Stance on Residency

Though it is unclear whether tax related influences are the reason 55,000 individuals move from New York to Florida each year, New York is taking an aggressive stance on ex-New Yorkers when it comes to state taxes. The state puts the burden of proving non-New York residency on those that move and do not pay state income taxes, and in some cases that means proving location outside of the state for over half of the year down to each day. This can be a difficult task of trying to track down receipts and phone records to prove one's daily location.

See Bloomberg News, How New York Hunts Down Tax Refugees, Financial Advisor, Feb. 26, 2015.

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

Article on Reintegrating the Wealth Transmission System

Melanie B. Leslie (Professor of Law and Vice Dean, Benjamin N. Cardozo School of Law) and Stewart E. Sterk (Mack Professor of Law, Benjamin N. Cardozo School of Law) recently published an article entitled, Revisiting the Revolution: Reintegrating the Wealth Transmission System, 56 B.C.L. Rev. 61 (2015). Provided below is the abstract from the article:

Thirty years ago, John Langbein published “The Nonprobate Revolution and the Future of Succession.” The article celebrated testators’ newfound ability to avoid the expense and delay of the probate court system by holding assets in a variety of non-probate devices, such as retirement and bank accounts with beneficiary designations and revocable trusts. Langbein highlighted problems the revolution might generate and predicted how they might be resolved. Since then, significant problems have indeed developed. First, wills law doctrines designed to effectuate intent of testators have not been universally extended to non-probate transfers. Second, the fragmentation of the wealth transmission process has created coordination problems that did not exist when almost all of a decedent’s assets passed through the decedent’s probate estate. This has increased opportunities for attorney error. Even when attorneys get it right, rogue clients can easily undermine a carefully constructed estate plan, and the law does not always allow courts to correct these errors. Third, the non-probate system increases the potential for wrongful takers to dissipate assets before rightful beneficiaries have an opportunity to make claims to those assets. As we explain, neither lawyers, financial institutions nor the legal system have successfully resolved these issues. We advance several proposals that might ameliorate the costs of the non-probate system, such as conferring broader power on estate executors to coordinate non-probate assets, and a voluntary registration system that would reduce the risk of inadvertent conflicts among wealth transmission documents.

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