Wills, Trusts & Estates Prof Blog

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

Wednesday, November 30, 2016

Article on Property Conversion Clauses in Marital Trusts

Marital deductionPatrick J. Duffey recently published an Article entitled, Dude, Where’s My Income? Examining Property Conversion Clauses in Marital Trusts, 51 Real Prop. Tr. & Est. L.J. 1 (2016). Provided below is an abstract of the Article:

The “Marital Deduction” matters. As an instrument of public policy, it is a powerful statement by Congress that spouses are a single taxable unit. As a planning tool it is a flexible technique, subject to no dollar limitation, with few technical restrictions, and with relatively simple practical application. For these reasons and others, it is widely used both during life and at death. In fact, there is no single deduction that is more significant. It is, simply, the foundation of an estate plan for the quintessential married couple.

But there is a peculiar, technical, and inflexible requirement of the Marital Deduction that, though extraordinarily important, is often overlooked by planners who largely rely on form documents to provide the necessary “boilerplate” provisions required for modern trusts: spousal conversion of unproductive property. This required power, often effectuated by a trust provision (a Property Conversion Clause), operates to fulfill the substance behind the command found in the Treasury Regulations (Regulations) that trustees must distribute all income from trust property in order to qualify for the Marital Deduction. When a trust holds a significant amount of unproductive property, that rule is rendered toothless without a power, exercisable by the spouse, to force the trustee to sell that property and purchase income-producing property in its place.

The questions raised by the spousal conversion power are numerous. When, if ever, does underproductive property become “unproductive” for purposes of the Regulations? What timing requirements are associated with the spouse's right of conversion? When will local law suffice to fulfill this requirement? What portion of trust assets must be unproductive in order to trigger application of the conversion requirement? What portion of trust assets must be unproductive in order to trigger application of a given Property Conversion Clause? May the trustee use alternate methods to make adequate distributions to the spouse while preserving otherwise desirable (or unmarketable) trust property?

The Regulations, case law, and Internal Revenue Service (Service) provide guidance in this area that implicate these issues and more. All are worthy of comment. Although this Article does address those discrete issues, its central focus is the inexorably interrelated dichotomy between the role of Property Conversion Clauses as check-the-box requirements for a tax deduction and as substantive provisions in millions of trusts that hold billions of dollars in endlessly varying assets. This duality is examined both from the perspective of a planner looking to draft such a clause and the perspective of an administrator struggling with a flawed or missing provision. Towards that end, this Article includes sample provisions and practical suggestions drawn from analysis of state and federal law, including statutes, regulations, published guidance, and case law.

November 30, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Hundreds of Strangers Attend Homeless Veterans Funeral

Veteran funeralHundreds of strangers attended a homeless U.S. veteran’s funeral in Wyoming. Stephen Reiman died in a Wyoming hospital, suffering from post-traumatic stress disorder, after traveling from California with few possessions. Nobody visited Reiman in the hospital, but the coroner hoped that people from the community would attend his funeral to mark his passing. The funeral was a momentous occasion to bring awareness for homeless veterans.

See Emily Crane, A Hero’s Farewell: Hundreds of Strangers Attend the Funeral of a Homeless U.S. Navy Veteran They Had Never Met – After He Died Alone Suffering Post Traumatic Stress, Daily Mail, November 29, 2016.

November 30, 2016 in Current Events, Death Event Planning, Estate Planning - Generally | Permalink | Comments (0)

How to Delay Death

Racquet sportsA new study reports that swimming, racquet sports, and aerobics provide the best odds of delaying death, particularly dying from heart disease or stroke. The study looked at various types of exercise and their risk levels to determine which showed significant benefits for public health. The study further found that racquet sport players had a 56% lower risk, swimmers had a 41% lower risk, and those who engaged in aerobics had a 36% lower risk of dying from heart disease or stroke as opposed to those who did not participate in sports.

See Want to Delay Death? Then Swim, Dance, or Get on Court, Study Shows, Fox News, November 30, 2016.

November 30, 2016 in Current Events, Estate Planning - Generally, Sports | Permalink | Comments (0)

Netherlands Man Chooses Assisted Suicide

Euthenasia kitA man in the Netherlands was allowed to have assisted suicide due to his long battle with alcohol addiction. Sixteen years ago, the Netherlands implemented a euthanasia law for people living with “unbearable suffering” and no prospect of improvement. Last year, over 5,500 people ended their life using this law. After several stints in rehab, the man decided to end his suffering. Some have argued against these laws, contending that it undermines the treatment and help that those suffering should receive. Countering this argument is that not everyone is curable, and those people need a humane way out.

See Tom Embury-Dennis, Man in the Netherlands Euthanised Due to His Alcohol Addiction, Independent, November 29, 2016.

November 30, 2016 in Current Events, Death Event Planning, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, November 29, 2016

Muhammad Ali Famed Knockout Picture Hits the Auction Block

Knockout picMuhammad Ali’s iconic knockout picture from his 1965 Sonny Liston rematch hits the auction block this weekend. Taken by famed photographer, Neil Leifer, the starting bid for the piece of history is $160,000, but auctioneers expect the winning bid to reach over $600,000. The knockout from the picture is a legendary career moment for Ali and essentially launched his stardom. The photo also comes with a handwritten message from Ali.

See Muhammad Ali: Liston Knockout Pic Hits Auction . . . Could Sell for $600k!!, TMZ, November 29, 2016.

November 29, 2016 in Current Events, Estate Planning - Generally, Sports | Permalink | Comments (0)

Article on Third-Party Liability in Equity

Trustee2Sarah Worthington recently published an Article entitled, Exposing Third-Party Liability in Equity: Lessons from the Limitation Rules, Equity, Trusts and Commerce Ch. 14 (Forthcoming). Provided below is an abstract of the Article:

This article provides a re-examination of third-party liability in equity. The exercise was prompted by a difficult case on limitation periods in equity, but the conclusions – if correct – have far wider significance. Three major points are made. First, it has long been conceded that the language of constructive trusts and constructive trustees is confusing. It is suggested here that the language disguises a relatively straightforward search for situations where there are property splits (trusts) or property management responsibilities (fiduciary responsibilities). Secondly, accessory liability in equity looks to be something of a misnomer, since it appears that the drive is not to find individuals with particular associations with the wrongdoer and shared liability for the primary wrong, but instead to find individuals who are themselves trustees or fiduciaries because of their particular association with the original managed property. Liability follows accordingly, and is primary not secondary liability. Finally, where there are fiduciary responsibilities for property management, liability is in two forms: compensation for loss to the managed assets; and disgorgement of disloyal gains. The former is distinguishable from common law compensation in its focus on remedying loss to the property fund, not the loss to individuals interested in the fund. These insights – in particular the fiduciary characteristics of third parties in equity, and the workings of equitable compensation – have significant practical consequences.

November 29, 2016 in Articles, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Trump to Put His Businesses in a Blind Trust

Blind trustDonald Trump is planning to put his business assets into a blind trust run by his oldest children. However, he does not plan to meet the legal definition of a blind trust due to the trust not being managed by an independent party and him possibly having his hand in some of the decision-making. If he were to set up a true blind trust, he would need to appoint an independent trustee and liquidate his assets. On the other hand, Trump will be required to disclose his assets under the Ethics in Government Act. 

See Debra Cassens Weiss, Trump Plans to Place His Businesses in a Blind Trust Run by His Children; Will It Resolve Conflicts?, ABA Journal, November 14, 2016.

November 29, 2016 in Current Events, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Prince Now Has an Alleged Wife?

Prince8Prince now has an alleged wife, Claire Elisabeth Elliott, who is warning his estate that when he died all of his money was to go exclusively to her. The woman filed a request to remove Bremer Trust bank as the administrator of Prince’s estate, believing she should be making all the decisions for his estate as its sole heir. She claims to have a marriage certificate as proof. The singer’s alleged wife’s claims are looking quite bleak.

See Prince: Woman Warns Estate . . . Step Aside, I’m His Wife!, TMZ, November 28, 2016.

November 29, 2016 in Current Events, Estate Planning - Generally, Intestate Succession, Music | Permalink | Comments (0)

Monday, November 28, 2016

Article on Life Insurance Valuation for Seniors

Life insurance valuationJon B. Mendelsohn recently published an Article entitled, Rethinking Life Insurance Valuation for Seniors, Trusts & Estates (Nov. 2016). Provided below is a summary of the Article:

Life insurance has long been considered a hard to value asset. Practitioners and planners have dealt with a variety of definitions of fair market value (FMV), depending on the particular application that’s being addressed. Historically, standard valuation practices come with their own set of challenges. Similar to other asset classes, this topic is evolving, and there are current valuation methodologies that provide an independent market-based value for life insurance that accurately conforms to the Internal Revenue Service definition of FMV. This level of precision can influence planning scenarios and open up new options when dealing with complicated life insurance decisions involving senior clients.

November 28, 2016 in Articles, Elder Law, Estate Planning - Generally | Permalink | Comments (0)

A United Family at Time of Death

Family end of lifeParticipation in the end of life for an aging parent comes with obligations. Teamwork, coordination, and cooperation can all help smooth the emotional journey, especially when family disagreement seems imminent. Families who cannot agree on the care to provide for their loved ones can end up causing more pain for the person they are trying to comfort and protect. The most common disagreement stems from a family member who competes to prove who cares the most, which can often lead to the suggestion of overly aggressive treatments. The squabble over the decision-making can result in issues that prolong some aspect of the dying process to the detriment of the dying. Aids like Physician Orders for Life-Sustaining Treatment (POLSTs) can help families come to an agreement in the implementation for care of their loved ones.

See Samuel Harrington, A United Family Can Make All the Difference When Someone Is Dying, Washington Post, November 20, 2016.

November 28, 2016 in Death Event Planning, Disability Planning - Health Care, Estate Planning - Generally | Permalink | Comments (0)