Wills, Trusts & Estates Prof Blog

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

Sunday, July 28, 2019

Massachusetts and the Spendthrift Trust

MassachusettsIn Challenging the Judge:  The Massachusetts Appeals Court Continues to Make Its Own Rules of Trust Law (Steve Leimberg Asset Protection Newsletter), Alexander A. Bove, Jr. & Melissa Langa discuss the recent case of Levitan v. Rosen, Mass. Appeals Court No 18-P-847, May 6, 2019:

The Massachusetts Appeals Court has done it again.  It has disregarded and casually cast aside one of the most important well-settled and commonly used principals of trust law – the spendthrift trust – in order to justify its decision in a divorce case involving a ‘third party” trust (one settled by someone other than the beneficiary).  Four years ago, the same court gained national attention when it held that a husband’s fractional share of assets in an irrevocable spendthrift trust established by his father for the husband and ten other beneficiaries should be treated as part of the marital estate for purposes of equitable division. On appeal to the Supreme Judicial Court, the highly criticized ruling was reversed.  In the subject case, the Appeals Court again felt it could justify its similarly aggressive holding on the basis that this time there was only one (lifetime) beneficiary of the irrevocable spendthrift trust in question rather than eleven.  Thus, the beneficiary’s interest in the trust was more than an “expectancy”, and despite decades of law upholding the spendthrift provision, that would justify disregarding the spendthrift provision and treating the entire trust fund as a “marital asset subject to equitable division”

Follow this link to read the complete article: Download Massachusetts_Spendthrift_Trusts.

July 28, 2019 in Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Oregon Authorizes Purpose Trusts

OregonIn The Continuing Rise of the Purpose Trust (Leimberg Newsletter), Alexander A. Bove, Jr. & Melissa Langa discuss the new Oregon purpose trust statute:

Little by little the purpose trust has been making its way into U.S. law and estate planning.  In the Leimberg Newsletter #2711, LISI contributor Alexander Bove reviewed the basics of purpose trusts and how they could be used to hold a family business in perpetuity, while still retaining control and providing benefits for the family.  He pointed out that, although several states permit the use of purpose trust through Uniform Trust Code section 409, the only state that at that time had a “stand-alone” purpose trust statute was South Dakota.  South Dakota must now make room for Oregon, which just passed its own purpose trust law, this one with a special feature – the Oregon purpose trust must have a “business purpose.”  Thus, there remains a question as to whether it can be established to maintain a family compound, for example, or a family art collection, but in any event, Oregon may be complimented for its innovative move.

To read the entire article, follow this link: Download Purpose_Trust.

July 28, 2019 in New Legislation, Trusts | Permalink | Comments (0)

Saturday, July 27, 2019

Article on "Body" Building: Expanding Arkansas's Standard for Holographic Wills

WillAndrew L. Lawson recently published an Article entitled, "Body" Building: Expanding Arkansas's Standard for Holographic Wills, 71 Ark. L. Rev. 917-967 (2019). Provided below is an introduction of the Article.

In times past, entirely handwritten documents represented the vast majority of holographic wills. These homemade testaments included dense pages of text that the drafter diligently memorialized by hand, carefully crafted letters with testamentary directions to the author's loved ones, and unassuming notes tucked away in a drawer, perhaps with names, proportions, and shorthand property descriptions. If a probate court encountered a holographic testament, odds were that it resembled these traditional examples.

Today's holographs can look quite different. Rather than scrawling testamentary wishes on a blank slate, modern testators might use a preprinted will form to record their last wishes, filling in blanks by hand and signing in the space provided. The vast library of forms that the Internet made available has only facilitated this trend. These hybrid documents have posed difficult questions for probate judges, generating a web of alternate standards for the required amount of handwriting in a holograph. The basic idea remains the same - the testator must handwrite the document, to some extent, and sign it. But states vary considerably beyond that basic framework, often with standards that boggle the mind to properly understand. Arkansas' holographic will statute is no exception.

To properly draft a holographic will in Arkansas, a testator must handwrite "the entire body of the will" and sign the document. The struggle to derive consistent meaning from this language has generated precedent that is ambiguous at best and perplexing at worst. The latest appellate decision used conflicted reasoning to invalidate a hand-completed will form, finding that it failed the "body of the will" standard. Standing alone, the result in that case is by no means irrational. Certainly a court may reasonably construe "the body of the will" to exclude a document with intermingled printing and handwriting. But the court's failure to precisely articulate its reasoning in reaching that decision raises a bevy of interpretive concerns moving forward, leaving judges and testators to wonder what, exactly, is the "entire body of the will?"

This lack of certainty, and apparent disfavor of preprinted will forms, poses both theoretical and practical problems. Layperson testators and probate courts lack guidance in determining which instruments qualify as holographic wills. Drafters lacking intricate knowledge of Arkansas wills law may draft ineffective testamentary dispositions, which undermines testamentary intent. At the same time, probate courts must decide whether to probate partially handwritten documents without the assistance of reliable precedent. This unenviable task promotes a more subjective judicial analysis, rather than objective application of law to fact, which may further cloud the case law.

The question, then, is how to clarify the existing standard in a manner that promotes optimal results and remains within the acceptable bounds of the statutory language. Given the rapid technological increases of recent decades, an ideal standard would account for preprinted forms and afford the judiciary flexibility in responding to advancements. This Article suggests that the approach most likely to have that effect is to broadly interpret the "body of the will," a construction that would have two aspects. It would require testators to handwrite only their beneficiaries and the words describing the division of their property among those beneficiaries - i.e., the "body" of the will. And it would allow courts to consider non-handwritten portions - such as a will form's printed language - as evidence that the decedent intended the document as a will.

This Article begins with a discussion of the background of holographic wills and the standards applied to the handwriting requirement. Next, it describes the ambiguous nature of the "body of the will" standard, as formulated in Sneed v. Reynolds and Meadows v. Ferrell, and summarizes alternative approaches to resolving the interpretive problems. It then outlines the contours of the proposed broad interpretation and provides reasons in support of its adoption.

July 27, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Wills | Permalink | Comments (0)

Friday, July 26, 2019

Descendants of Last German Kaiser Fight to Reclaim Royal Property

CecilIt has been over a hundred years since the last German monarch, but the Prussian royal descendants have continued to battle the government for what they believe are royal assets and properties. The Hohenzollern family argues that the bulk of the properties and possessions under dispute were expropriated by Soviet authorities at the end of World War II. The list includes Cecilienhof, the spatial palace that hosted the 1945 Potsdam conference between the leaders of the US, Britain and the USSR that settled the postwar order in Germany, which the family states they should be allowed to reside rent-free.

Günther Winands, a senior chancellery official, said that a meeting between representatives of the family and government officials did not come to a settlement. “But our goal remains to find a mutually agreeable solution soon, so we can avoid long-running legal confrontations.” Markus Hennig, a lawyer for the Hohenzollerns, said the family does not want to remove artifacts that are housed in museums, but rather desires to untangle the legal status of the possessions.

The revelation that the Hohenzollern family is striving to reclaim their former possessions and homes has sparked political outrage among German citizens. Many of the objects and Cecilienhof have been preserved through tax payer money, and thus they believe should not be handed over to the royal family that was involved with the rise of World War I and Nazism.

See Tobias Buck, Descendants of Last German Kaiser Fight to Reclaim Royal Property, Financial Times, July 26, 2019.

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

July 26, 2019 in Current Events, Estate Administration, Estate Planning - Generally, Travel | Permalink | Comments (0)

Thursday, July 25, 2019

Comment on Losing Your Mind, Losing Your Rights?: A Certification Process to Safeguard Alzheimer's Patients and the Moving Target of the Lucid Interva

AlzKaitlyn C. Meeks recently published a Comment entitled, Losing Your Mind, Losing Your Rights?: A Certification Process to Safeguard Alzheimer's Patients and the Moving Target of the Lucid Interval, 44 U. Dayton L. Rev. 79-109 (2018). Provided below is the introduction to the Comment.

Picture this: you have awakened, on a seemingly normal day, to a drastic lifestyle change -- the care of your mother or father. You, the child, have now become the parent. Why has this happened? One, or perhaps both, of your parents was recently diagnosed with Alzheimer's disease ("AD"), [*80] rendering him or her incapable, in the eyes of the law, of maintaining complete and autonomous control over their life. The child is now the sole caretaker for the parent's health, safety, finances, well-being, and legacy. As the new primary caretaker for an ailing parent, your life has become overwhelmed with legalities -- Power of Attorney Forms, Health Care Directives, and Living Wills and Trusts. These stresses are in addition to the emotional effects as well as the financial and physical demands a caregiver is confronted with on a day-to-day basis.

Will you ever be able to see the parent you once knew again, or will the remainder of your parent's life be surrounded in a cloud of the unknown? And then, with no warning, it is as if nothing but time has changed, and there is a return to your loved one's true self. Yet, with the blink of an eye, the disease takes hold once again, and the moment of lucidity has vanished.

"Your brain is your most powerful organ[.]" However, it is exactly the powerhouse organ which is attacked when a person has a degenerative disease like dementia. Dementia is the collective name for a series of brain disorders which affect cognitive capabilities, generally worsening as time progresses. Alzheimer's disease ("AD") is the most common and prevalent form of dementia. Since AD was first discovered in 1901, our ability to treat and cure the disease has yet to encounter any significant medical breakthroughs.

"Every four seconds, someone is diagnosed with Alzheimer's Disease." Within the United States, someone develops the disease every sixty-six seconds. According to the 2017 annual report by the Alzheimer's Association, one in ten people over the age of sixty-five are currently living with the disease, and the data projects that the amount of people who will be affected by AD will double within the next thirty years as the baby boomer generation settles into the elderly population. The elderly and "oldest-old" populations are expected to account for nearly 80 million Americans by 2050.

AD primarily affects the elderly; however, the elderly, in general, are an age group which seems to traditionally be excluded from many research benefits, including financial resources. Perhaps this illuminates the reason why one of the most aggressive diseases in today's society has failed to be cured, halted, or even alleviated. While the fight against AD is not stagnant by any means, an inability to proactively address issues stemming from the disease will have adverse effects on numerous professions.

Examining the growth of the disease's prevalence, there is an inevitable chance of correlation affecting the legal system through capacity challenges pertaining to AD patients, both while alive and after death. While areas of capacity, have been argued, discussed, and critiqued throughout the years, it seems that no clear foundation or consensus on how to address these growing issues has been established. Undeniably, without clear visions, capacity issues with AD patients will only worsen, especially when taking into consideration it is not a "one size fits all" kind of disorder.

In consideration of capacity issues for those suffering from AD, brief, spontaneous moments of lucidity sets apart the legal complications of the disease from many other disorders. Both in the medical and legal sense, a lucid interval is defined as "[a] period of sanity intervening periods of insanity[,]" and is measured by its strength, in that "[i]t must be such a full return of his mind to sanity . . . enabling [a person] to understand and transact his affairs as usual." For a person with AD, especially an advanced state of the disease, a lucid interval may be the only time he or she is able to make decisions for him or herself, or to see that his or her wishes in place are being properly executed. Because of this, the lucid interval is a "moving target." There is simply no way to predict a lucid interval, and there is no way to confirm a lucid interval without awareness in the aftermath.

This Comment will examine the increasing importance of a more standardized approach for an attorney to take when counseling an AD patient. First, to set the scene, an in-depth examination of the disease is needed: what AD is, the history of the disease, the unsuccessful attempts to prevent or cure Alzheimer's, and its current and future impact on society and the economy. Second, this Comment will address the current state of AD within the courts. The focus will be on how AD is currently seen in a legal context and how the lucid interval is treated within the judiciary. In addition, a Puerto Rico statute, which seems to balance the rights of freedom to contract with the protections of the patient's current and future estate interests, creates an unattainable objective approach to balancing the lucid interval and AD.

Third, this Comment will examine the conclusions of prior and recent case law to demonstrate how the topic has been construed in various states, focusing on how the application varies within the judiciary. Lastly, the Comment will propose a certification process for attorneys who regularly assist as counsel to AD patients. The proposed course will certify any participating attorney as a "Certified Alzheimer's Legal Specialist" upon successful completion. A Certified Alzheimer's Legal Specialist would best be defined as an attorney who is substantially familiar with the disease itself, can fully comprehend the legal ramifications of the client's desired acts by taking the time to understand the condition as pertaining to the individual client, and can ultimately serve in the prime position to ensure that an individual possesses the requisite capacity mandated under the law. This standardized approach would serve as clear evidence that his or her client was within a lucid interval -- having adequate capacity -- at the time a document was executed. The attorney is then the party that both understands the legal ramifications and how those ramifications benefit the client. This will help to not only protect the rights of an AD patient's autonomy, but will ultimately help eliminate the inevitable flooding of the courts.

It is paramount to maintain objective standards when examining an AD patient's affairs, as opposed to the subjective standards that are currently employed, both in practice and throughout the judiciary. When particularly observing the influx of the baby boomers into the realm of Elder Law, this Comment's proposed certification process comes at the ideal time. Addressing these considerations, stricter procedures need to be enacted, and ideally, implemented and overseen by a governing legal association. This will ensure that an attorney for an AD client is able to execute a legally enforceable matter at that precise moment as a means to uphold the client's wishes as well as to protect against an almost certain rise in litigation that surrounds the future of this disease.

July 25, 2019 in Articles, Current Affairs, Disability Planning - Health Care, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

CLE on Drafting a Living Trust: From Start to Finish

CLEThe National Business Institute is holding a video webcast entitled, Drafting a Living Trust: From Start to Finish, on Monday, July 29th, 2019, from 10:00 a.m. to 5:00 p.m. Central. Provided below is a description of the event.

Program Description
Practical Walkthrough of Trust Selection, Drafting, Funding and Taxation

Living trusts are one of the fundamental building blocks of estate planning. This legal course will take you through every step of the way in choosing, drafting and incorporating the trust into your client's estate plan. Register today!

  • Get an update on the latest laws governing trusts and estates.
  • Simplify drafting with sample key trust provisions.
  • Make certain the trusts you draft are tax-efficient.
  • Anticipate and prevent trust disputes.

Who Should Attend

This legal course is designed for attorneys. It will also benefit accountants, trust officers, and paralegals.

Course Content

  • Estate Transfer Laws: What You Need to Know Before Drafting Begins
  • Revocable or Irrevocable Living Trust: Helping Clients Choose the Right Option
  • How to Draft Revocable and Irrevocable Trusts - With Sample Documents
  • Funding the Trust
  • Coordinating the Trust With the Rest of the Estate Plan
  • Taxation Essentials for Revocable and Irrevocable Living Trusts
  • Living Trust Dispute Basics: Proactively Preparing on the Front End
  • Ethical Considerations

July 25, 2019 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Wednesday, July 24, 2019

Article on You Settled it, Right? Family Settlement Agreements in Probate, Trust, and Guardianship Disputes

TexastechJ. Ellen Bennett, Mark R. Caldwell, & Donovan Campbell, Jr. recently Article entitled, You Settled it, Right? Family Settlement Agreements in Probate, Trust, and Guardianship Disputes, 11 Tex. Tech Est. Plan. Com. Prop. LJ, 213-254 (2019). Provided below is an introduction to the Article.

In practice, very few cases proceed to trial. Statistically, most disputes are settled (usually through mediation). Probate, trust, and guardianship disputes are no exception. These cases are frequently resolved by utilizing what is known as the family settlement doctrine and entering a family settlement agreement (FSA). Despite the frequency with which these cases settle, drafting effective probate, trust, or guardianship FSAs can be more complicated than anticipated. For a variety of reasons, these FSAs can be both substantively and procedurally tricky. This article highlights some of the common procedural issues the practitioner may frequently encounter in the three key phases of entering a probate, trust, or guardianship FSA: (1) formation; (2) exchanging consideration; and (3) enforcement.

The complexity of probate, trust, and guardianship settlements is driven by a variety of factors. First, it can be challenging to identify all of the necessary parties who must sign a probate, guardianship, or trust settlement as compared to those who should, but are not required, to sign it. This analysis is usually at the forefront of the minds of the parties, who want to finally resolve their dispute and eliminate the possibility for someone to later challenge it or claim that the settlement is not binding on them. Even after all of the necessary parties are identified, however, settling parties who are serving as fiduciaries must be mindful to fulfill their disclosure duties to the appropriate persons before entering a settlement. Additionally, in a typical probate, trust, or guardianship dispute, there are frequently parties, such as administrators, guardians, or attorneys ad litem, who require court authority to enter a settlement or to fulfill its terms. Thus, unlike other areas of the law, a probate, trust, or guardianship settlement may--even after all the parties have signed it--be subject to additional conditions precedent before the parties are actually required to perform their contractual obligations in earnest. Additionally, depending on the terms of the FSA, any later court order may be limited to merely approving the FSA, or the court may adopt and incorporate the FSA into the order, thereby making it the judgment of the court. These different acts significantly impact the parties' options to enforce the FSA.

These unique dynamics present complexities that many settling parties (and their counsel) do not anticipate when drafting the FSA. As with most contracts, the devil can be in the details. Careful attention should be given to expressly stating what happens if things do not go as planned (e.g., when a necessary party ends up not signing the FSA or the parties fail to secure court approval of the FSA) and knowing the applicable law in default.

July 24, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Guardianship, Trusts, Wills | Permalink | Comments (0)

Indiana Court of Appeals Opinion Upholds the Importance of Accountings in Trust Administration

CourtroomTwo siblings, after a mediated settlement and petitioning properties, two siblings again saw themselves against each other in court. Scott sued his sister, Stacey, in her capacity as trustee of his trust in In Re: The Scott David Hurwich 1986 Irrevocable Trust. Scott alleged that his sister did not provide an accounting, misused trust assets, and misappropriation of $107,000 of trust assets, which were characterized as trust expenses.

At trial, Stacey did not dispute that she did not provide an accounting, but alleged that she had not done so for years and that Scott had never complained; thus, the two-year statute of limitations barred the claim. The trial court agreed. The court did find that she did wrongfully use trust funds for personal expenses amounting to a breach of trust and ordered Stacey to reimburse Scott his proportionate share of the funds, which was less than $500. It refused to aware Scott attorney fees, though, and even found that the $107,000, which was used for some of Stacey's litigation involving other family members, there was no wrongful conduct.

At the appellate level, the court agreed with the finding that the two-year statute of limitations applied because Scott could not explain why he waited so long to bring the claim. It reversed the lower court's decision and ruled that there had been a breach of trust involving the $107,000, because none of the invoices contained Scott's name and that Stacey had not justified the propriety of the expenses. The Indiana Court of Appeals also found that the trial was statutorily required to award whenever the court found a breach of trust.

See Sarah C. Jenkins & Jason M. Rauch, Indiana Court of Appeals Opinion Upholds the Importance of Accountings in Trust Administration, FaegrBD.com, July 22, 2019.

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

July 24, 2019 in Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Let the 'Zombie' Tax Extenders Die, Groups Urge Congress

TaxcalcOpponents to a package of tax extender bills approved by the House Ways & Means Committee on June 20 let their voices be heard this past week on Capitol Hill at a panel hosted by the Committee for a Responsible Federal Budget. The extender bills include H.R. 3298, The Child Care Quality and Access Act of 2019; H.R. 3299, The Promoting Respect for Individuals’ Dignity and Equality (PRIDE) Act of 2019; H.R. 3300, The Economic Mobility Act of 2019; H.R. 3301, The Taxpayer Certainty and Disaster Tax Relief Act of 2019.

The extender bills have been nicknamed "zombie bills" because they had previously expired within the last two years and proponents of them want to revive them from the grave. The Committee for a Responsible Federal Budget estimates that the extenders package would add $150 billion to the debt over 10 years with interest, and $710 billion over 10 years if the temporary policies were permanently extended due to only one of the bills being offset. That singular offset is in HR 3301, which would reverse the 2017 tax law’s estate tax exemption increase three years earlier than scheduled.

See Melanie Waddell, Let the 'Zombie' Tax Extenders Die, Groups Urge Congress, Think Advisor, July 22, 2019.

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

July 24, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0)

Tuesday, July 23, 2019

Risks of Premium Financed Indexed Universal Life Policies Revealed

Castle_CloudsIn How to Retire in the Magical Retirement Income Castle in the Clouds, Lawrence J. Rybka explains "the use of premium financed Indexed Universal Life (IUL) policies to provide retirement income for clients. It explores the major assumptions in the IUL policies and in the bank loans used to finance them. Most importantly, it reveals undisclosed risks often taken by clients in these transactions."

This important and innovative article is available by following this link: Download Magical_Retirement_Castle.

July 23, 2019 in Articles, Non-Probate Assets | Permalink | Comments (0)