Wills, Trusts & Estates Prof Blog

Family Feud Continues over Estate Left by the Founder of Rush Enterprises

W. Marvin Rush II died at the age of 79 back in May of last year, but the battle over his estate is far from over, considering that he was the founder of one of the largest commercial truck dealership chains in North America. Rush Enterprises currently has a market cap of $1.32 billion. W.M. "Rusty" Rush III and his step-mother, Barbara, continue to take the fight to the Texas courts.

Rusty, 61, is the current chairman, current chief executive and president of Rush Enterprises, and began working for his father at the company in 1974. Barbara was Marvin's third wife and previously his secretary, and Rusty claims that his father insisted that she sign a marital agreement before the marriage occurred in 1991. The document stated that she "gave up any rights she might otherwise have, then or in the future, to claim any interest in any of Marvin's separate property or what might otherwise be community property," including any interest or title in Rush Enterprises, according to an amended lawsuit filed in Bexar County district court. However, the lawsuit also says that Marvin signed a durable power of attorney in 2013 that gave Barbara "unilateral control" over all of his assets. Rusty claims this is a clear sign that his father did not have the mental capacity to sign the document, because he did not disclose it to either of his sons, and prior to this Marvin had also been adamant about his wife staying out of the business decisions.

Barbara created the Rush Living Trust in 2017, transferring most of Marvin's assets into it, according to the lawsuit, including real estate, cash, automobiles, and stock to Rush Enterprises. The beneficiaries of the trust, valued at more than $44 million, are Barbara and her daughters. Barbara has also presented two 2013 wills that supposedly revoke the 2006 will Rusty filed.

See Family Feud Continues over Estate Left by the Founder of Rush Enterprises, MSN, June 26, 2019.

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) for bringing this article to my attention.

Article on Property and the Interests of Things: The Case of the Donative Trust

Johanna Jacques recently published an Article entitled, Property and the Interests of Things: The Case of the Donative Trust, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Within a liberal, ‘law of things’ understanding of property, the donative trust is seen as a species of gift. Control over trust property passes from the hands of settlors to beneficiaries, from owners to owners. Trust property, like all other property, is silent and passive, its fate determined by its owners. This article questions this understanding of the trust by showing how beneath the facade of ownership, the trust inverts the relation between owner and owned, person and thing. It analyses the relation that trustees, beneficiaries and settlors have to the trust property and argues that the role of each of these parties can be shown to consist in furthering the interests of the trust property rather than their own. It claims that this protects things from their owners at the same time as it ensures these owners’ ongoing care towards the things they own. This raises questions about the trust’s status within the institution of private property, justified as it is by the human autonomy it is said to enable.

Canadian Trust Subject to US Tax

If a trust that is created and operated in Canada suddenly has an American beneficiary due to them moving to the states, a practitioner should understand the requirements for the American side of reporting.

Not only should the trust distribution be filed on a form 1040, U.S. Individual Income Tax Return, but also the beneficiary must also file a form 3520, Annual Return To Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, as well as form 8938, Statement of Specified Foreign Financial Assets, which may have specialized valuation rules. The reporting requirements do not stop there. If the beneficiary receives as a distribution equal to more than 50% of the trust's income, they must file FinCEN form 114, Report of Foreign Bank and Financial Accounts.

There is also individual state income tax reporting to consider. Many states impose a state-level income tax on trusts, and the rules vary widely from state to state. New York only taxes trust income if the trust was created by a New Yorker or the trust makes its income from within the state. California, on the other hand, will attempt to tax any trust income that any resident of their state receives. To makes this even more complicated, a Canadian practitioner should also consider estate tax issues and whether the trust falls above the exemptions amount, both at the federal level and the individual state level (if applicable).

See Catherine B. Eberl, Canadian Trust Subject to US Tax, Canadian Tax Highlights, Volume 27, Number 6, June 2019.

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

Is Imposing a Wealth Tax a Good Idea?

Recently, a group of wealthy Americans wrote a letter to the President saying that they should be taxed according to Senator Elizabeth Warren tax plan. That is, 2% on assets over $50 million and an additional 1 cent on the dollar for assets over $1 billion. Not only do they claim that that the proceeds from the tax will go to well-needed programs, but that the majority of Americans are for a tax for the extremely wealthy.

These types of calls to action are not new, especially when the country is nearing an election. But it is possible that this letter was more partisan than it claimed, as it appeared to cry out more to the Democratic presidential hopefuls than the current establishment. But would it better to tax the ultra-wealthy such a minute amount than just allow them to donate to their heart's content into the private sector, or even to the Federal Bureau of Fiscal Service? The Service said last year that the average donation was $2.69 million, while the federal government received $3.38 trillion from taxes during the 2018 fiscal year.

Would a wealth tax change the economic behaviors of the extremely wealthy? Would they stop donating to their pet causes because that money is already being taken out? We will have to see.

See Steven Chung, Is Imposing a Wealth Tax a Good Idea?, Above the Law, June 26, 2019.

Special thanks to Carissa Peterson (Hrbacek Law Firm, Sugar Land, Texas) for bringing this article to my attention.

Discovery of Aretha Franklin's Handwritten Wills Throws Her Estate Into Turmoil

Originally thought to have died intestate, two possible handwritten wills written by the musical diva Aretha Franklin have caused quite a commotion with her estate. The appointed representative is now asking the court to determine if either of the wills are valid under Michigan law.

The wills are seen as holographic, or handwritten, and must meet certain qualifications. They must be entirely in the testator's handwriting, must be dated, must be signed, and must have been intended to be a will. Two were dated 2010 and a third was dated 2014, and it unclear whether any of the documents will meet the other standards, being as they go off on tangents and are difficult to read. Two of Franklin's four sons are contesting the validity of the wills, and though a niece is acting as the representative, one of the documents appoints one of the sons to act as the representative.

All of this expense and turmoil could have been avoided if the diva had consulted with an estate planning attorney and put together a will and/or trust. With a good estate plan, she also may have been able to keep the details of her estate private through the trust instead of having the battle play out in public. 

See Discovery of Aretha Franklin's Handwritten Wills Throws Her Estate Into Turmoil, Elder Law Answers, May 31, 2019.

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

Britney Spears' Father Sues Free Britney Blogger for Defamation Over Conservatorship Comments

A creator of a blog devoted to the theory that singer Britney Spears, 37, is being controlled by her father and appointed conservator, Jamie Spears, 66, has now been sued by Jamie. The singer's father became her conservator (referred to as guardian in other jurisdictions) after her highly public mental breakdown in 2008.

Anthony Elia, the man behind the Absolute Britney blog, may have to explain certain comments that he made about Jamie Spears. The lawsuit claims that Elia made false and malicious claims that Jamie and his conservatorship controlled Britney's Instagram account to make her seem less stable and more in need of psychiatric help than she actually is. The blog has also strongly influenced the #FreeBritney movement, which questions why Jamie still has a conservatorship over Britney, despite the progress she has made in her mental health over the last 11 years. A conservator is usually only appointed for the severally debilitated, whether mentally or physically, or a person in their minority.

The pop singer has not commented publicly on her conservatorship, but did request to speak to the judge in her case at a closed hearing in May. The judge subsequently ordered a court review of Britney's situation before another hearing, currently scheduled for September.

See Jessica Sager, Britney Spears' Father Sues Free Britney Blogger for Defamation Over Conservatorship Comments, Fox News, June 27, 2019.

Article on Hope Springs Eternal: Reforming Inheritance Law in Islamic Societies

Ahmed Souaiaia recently published an Article entitled, Hope Springs Eternal: Reforming Inheritance Law in Islamic Societies, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Soon after Lajnat al-Hurriyāt al-Fardiyya wa-l-Musāwāt (“Committee on Individual Rights and Equality”) submitted its report in June 2018 to the president of Tunisia, Beji Caid Essebsi, the latter ordered the legislature to amend the 1956 family law to achieve equality between men and women in inheritance and property rights. Although the authors of the report had written forcefully about how Islamic texts (the Qurʾan and sunna) are compatible with modern law, some of their recommendations suggested a broad inclination to reform the law outside religious tradition and as part of the exigencies of the civil state. These events and ideas brought to the fore questions such as whether classical Islamic law is reformable or obsolete. This paper aims to show that interpretations of Islamic texts that result in radically different inheritance laws have existed since at least the third Islamic century. Inequality has persisted always for political and institutional reasons, not substantive ones.

Can an Eye Exam Reveal Alzheimer’s Risk?

A visit to the eye doctor could reveal clues to not only your vision health, but may also someday assist in analyzing the health of your brain. A recent study performed by the Harvard T.H. Chan School of Public Health shows links between many forms of eye conditions, such as glaucoma and diabetic retinopathy, to an increased risk of Alzheimer's and other forms of dementia. One eye condition that does not appear to be linked to Alzheimer's is cataracts, though it is also age-related.

“My view, and one of the possible explanations that the authors present, is that these three eye diseases and Alzheimer’s and dementia have a joined etiology (a common causative factor). All are linked to cardiovascular disease,” says Dr. Albert Hofman, chair of epidemiology. The study began in 1994 and involved 5,400 dementia-free adults, following them until they left the study, died, or developed a form of dementia. The study found that people with age-related macular degeneration were 20% more likely to develop dementia compared with people who did not have the eye condition. People with diabetic retinopathy were 44% more likely to develop dementia than those without, and those with a recent glaucoma diagnosis (not an established diagnosis) had a 44% higher rate of dementia.

Though eye exams today may not be able to tell a patient if they have Alzheimer's or dementia, the knowledge that this study brings could enable doctors to focus on preventive measures. “Doing all the things that you would do to prevent heart attack and stroke are likely beneficial to prevent Alzheimer’s disease,” says Dr. Hofman. This means treating high blood pressure and cholesterol, eating a healthy diet, getting enough sleep, and maintaining a regular exercise program.

See Kelly Bilodeau, Can an Eye Exam Reveal Alzheimer’s Risk?, Harvard.edu, June 7, 2019.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

Kaestner Trust — Supreme Court Guidance for State Trust Income Taxation

Steve R. Akers and Ronald D. Aucutt recently issued a summary of the unanimous Supreme Court decision of North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust. Provided below is the introduction to the summary.

North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, 588 U.S. __ (June 21, 2019) is the U.S. Supreme Court’s first opinion addressing the constitutionality of state taxation of the undistributed income of trusts in almost a century. In a 9-0 opinion, the Court upheld lower court findings that North Carolina’s income tax imposed on the Kaestner Trust over a specific 4-year period violated the Due Process Clause where the beneficiaries received no income in those tax years, had no right to demand income in those years, and could not count on ever receiving income from the trust.

States employ a variety of factors (or combination of factors) in determining whether the state can tax the undistributed income of trusts, such as the residency of the settlors, trustees, beneficiaries, or where the trust administration occurs. The opinion provides minimal guidance as to the constitutionality of those various systems (or the North Carolina beneficiary-based system under other facts), but reiterates and applies traditional concepts that due process concerns the “fundamental fairness” of government activity and requires “minimum contacts” under a flexible inquiry focusing on the reasonableness of the government’s action.

See Steve R. Akers & Ronald D. Aucutt, Kaestner Trust — Supreme Court Guidance for State Trust Income Taxation, BessemerTrust.com, June 24, 2019.

Special thanks to Scott M. Deke for bringing this article to my attention.

BMW Heirs Claim to not be Driven by Wealth

The two siblings that inherited the majority stake of Germany care company BMW claim that inheriting that much wealth is not as amazing as the media makes it out to be. 

Susanne Klatten, 57, is the richest woman in Germany with a net worth of an estimated $19.8 billion, according to Forbes, and owns 19.2% of BMW. She is also the owner and deputy chairman of Altana, a chemicals company, and holds stakes in wind power company Nordex AG and graphite-maker SGL Group. Klatten’s brother, Stefan Quandt, 53, owns 23.7% of BMW and is worth an estimated $16.7 billion. He says that it is not the money that drives them to be successful, but rather that, “Above all, it is the responsibility of securing jobs in Germany.” Klatten stated that “The role as a guardian of wealth also has personal sides that aren’t so nice.”

The siblings' interview was published this week in Bloomberg.

See Kathleen Joyce, BMW Heirs Claim to not be Driven by Wealth: Report, Fox Business, June 22, 2019.