Wills, Trusts & Estates Prof Blog

Comment of Proposed Department of Labor Regulations on ESG Investing, Prudence and Loyalty

Edward A. Zelinsky (Annie and Morris Trachman Professor of Law, Benjamin N. Cardozo School of Law, Yeshiva University) recently posted on SSRN his article entitled Comment of Proposed Department of Labor Regulations on ESG Investing, Prudence and Loyalty. Here is the abstract of his article:

DOL’s proposed regulations about ERISA’s fiduciary duties of prudence and loyalty weaken the protection of America’s workers and retirees. Accordingly, these proposed regulations should be amended to delete the imprudent, unproven and ambiguous term “ESG,” to add more balanced examples which reduce misperceptions of ERISA’s fiduciary duties, and to expunge altogether the concept of tie-breaking which violates the duty of loyalty by encouraging the pursuit of collateral benefits.

The fundamental claims of ESG advocates are economically implausible. Such advocates assert that they consistently outperform and manipulate competitive markets. This claim is unpersuasive.

ESG proponents assert that a person making an ESG investment is overriding the market’s allocation of resources to pursue a greater good. This claim is economically unconvincing. When a self-declared ESG-investor sells a stock in a competitive market, another investor without her qualms buys it. This is simply a game of musical chairs which, while it makes the ESG-investor feel better, shuffles ownership without altering the market-driven allocation of resources.

The other major claim of ESG advocates is that ESG investing, with its often high fees and active management, can consistently outperform competitive markets. This claim too is economically unpersuasive. If a corporation’s superior governance or more humane labor practices improve a corporation’s financial prospects, the corporation’s stock price will capture that projected income. A conventional, passive investment device, such as a low fee index fund, will reflect that increased value without invoking the ESG label and without paying fees for ESG investing services. It is implausible that ESG funds will consistently outperform competitive markets in which prices efficiently reflect corporation’s projected earnings including projected income stemming from so-called ESG factors.

DOL’s proposed regulations improperly perpetuate and liberalize the unpersuasive canon of “tie-breaking” and thereby jeopardize the retirement assets of workers and retirees. The fiduciary duty of loyalty requires exclusive consideration of participants’ welfare – even in the face of so-called “ties.”Under the proposed regulations, fiduciaries desiring to pursue otherwise proscribed collateral benefits will, deliberately or inadvertently, be encouraged to declare ties to free themselves from the duty of loyalty and its prohibition on the pursuit of third party benefits. Contrary to the teaching of the proposed regulations, the exacting duty of loyalty is not suspended in the presence of “ties.”

Podcast on Non-Fungible Tokens released by ACTEC Foundation

Here is a link to a podcast entitled An Update on NFTs, Non-Fungible Tokens which I prepared for the American College of Trust and Estate Counsel Foundation.

‘James Bond’ actor Daniel Craig says his children won’t be receiving his multimillion-dollar fortune

Daniel Craig, who is known for his legendary role as James Bond, is worth a reported $160 million. 

Recently, Daniel Craig gave his two sense about inheritance. According to Craig, he will not leave much money to his children by the time he dies. Craig stated, "Isn't there an old adage that if you die a rich person, you've failed?" Craig further stated, "I think Andrew Carnegie gave away what in today's money would be about $11 billion, which shows how rich he was because I'll bet he kept some of it, too." 

According to Daniel Craig, it is "distasteful" to leave heirs massive amounts of money. Craig's philosophy is to get rid of the money or give it away before he goes. 

See Nicolas Vega, ‘James Bond’ actor Daniel Craig says his children won’t be receiving his multimillion-dollar fortune, CNBC, August 20, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

 

Bitcoin, the Blockchain, and How Crypto is Changing Life Insurance and Estate Planning

Over the last few years, there has been an increase in people who obtain crypto assets. So how do cryptocurrencies impact estate planning?

Well, the foremost estate planning concern with crypto assets is "that if no one knows you have it, and you meet your demise, then its gone." Institutions like Two Ocean Trust are beginning to address these concerns. Two Ocean Trust is reportedly the first institution to offer a comprehensive digital asset wealth management platform.

According to Two Ocean Trust's CEO Joel Revill, "decentralized digital currency may not be compatible with estate planning due to the reluctance to hand over the keys to your digital wallet."

One way to address the concerns is to create a cryptocurrency access guide, which may include information on how to obtain the private key to digital assets. It also isn't a bad idea to share your private keys and other information with trusted family members. 

Below are some important estate planning steps that can be taken to protect cryptocurrencies: 

1.  Share your seed phrase and private keys
2.  Transfer your crypto to a trust and designate successors
3.  Place digital assets in a custody (such as a hardware wallet) or with a custodian service
4.  Use a “dead mans switch” to trigger the transfer of digital assets
5.  Select a cascading multi-signature wallet instead of a self sovereign wallet

See Bitcoin, the Blockchain, and How Crypto is Changing Life Insurance and Estate Planning, Insurance and Estates Blog, November 20, 2021. 

Special Thanks to Jason Kenyon for bringing this Article to my attention. 

J.R.R. Tolkien estate to ‘JRR Token’ cryptocurrency: You shall not pass

The JRR Token, which rolled out in August, has just been blocked by the estate of English fantasy writer J.R.R. Tolkien. 

The "JRR Token" referenced the late fantasy writer as well as the author's iconic fantasy trilogy "The Lord of the Rings." The token was released with the tagline, "The One Token That Rules Them All" on its website. The tagline was in reference to the iconic "One Ring that ruled the other magical 'Rings of Power' in the tale's mythology." 

However, when the Tolkien estate became aware of the new crypto currency token, the response was essentially "you shall not pass" and eventually turned to the World Intellectual Property Organization's arbitration procedure and is arguing that the "token infringed on trademark right's to Tolkien's name."

The "JRR Token" developer responded arguing that the token was actually not referencing the English fantasy author and that the name "just happened to bring J.R.R. Tolkien to mind, then it was parody, and not copyright infringement." 

Despite the Developer's contentions, the WIPO's arbitrator ruled in favor of the Tolkien estate, writing, "the respondent does not specify why the disputed domain name is humorous, funny, or nail-biting, and not just a domain name chosen due to its similarities with the [Tolkien estate's] trademarks to take commercial advantage of its evocation." 

See Nicole Lyn Pesce, J.R.R. Tolkien estate to ‘JRR Token’ cryptocurrency: You shall not pass, Market Watch, November 23, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

Happy Thanksgiving!

Happy Thanksgiving!!

Asia’s Richest Man Looks to Walton Family Playbook on Succession

Asia's richest man, Mukesh Ambani, has built an empire worth $208 billion. How has he continued to build that empire? Well, Ambani has "studied the ways in which billionaire families, from the Waltons to the Kochs, passed on what they'd built to the next generation. 

Ambani's succession plan is similar to that of Walmart Inc.'s Walton family and according to people familiar with the matter "could provide the framework for one of the biggest transfers of wealth in recent times." 

Ambani, his wife Nita, and their three children will own stakes in the new entity which will oversee Reliance, and the family members will also serve on its board, although management will mostly consist of outsiders and professionals. 

See P R Sanjai, Anto Antony & K Oanh Ha, Asia’s Richest Man Looks to Walton Family Playbook on Succession, Bloomberg Wealth, November 22, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

No, stupid: A dog isn’t really selling Madonna’s former Florida mansion

A story has been spread by a plethora of newspapers including the Associated Press and Forbes about a German Shepard named Gunther who inherited Madonna's former mansion. The story proclaimed that the pooch was selling the Florida mansion for $31 million and had even met with real estate agents. 

We are here to tell you that the story is emphatically not true! According to a source close to the deal, "[t]here is no dog sleeping in Madonna’s former bedroom. . .This is a totally made up story. The broker is talking nonsense. There is no dog. There never was a dog. The owner thought it would be a fun way to score a reality TV show. That’s it.” 

The real story is this: The agents are listing the house for $31.75 million, but instead of a wealthy dog, their client is a Italian Entrepreneur from Tuscany named Maurizio Mian. Although the listing price was not a lie, a broker who has toured the property claimed that "it is only worth it if you can afford to tear it down and start again." 

For those who were also fooled, legal experts in the United States proclaimed that it is impossible to leave property to a pet, although you can leave money in trust for your fur babies. 

As it turns out, the Main thought it would be a good PR stunt to fool the press into believing that a dog was selling a mansion that once belonged to Madonna. Unfortunately for Mian, it appears that the plan may have backfired. 

See Jennifer Gould, No, stupid: A dog isn’t really selling Madonna’s former Florida mansion, N.Y. Post, November 18, 2021. 

Millionaire pooch selling Miami villa once owned by Madonna

 DISCLAIMER: As it turns out the "Gunther" story is nothing more than a publicity stunt. Long story short, a dog is not selling Madonna's former mansion. 

 

See the real story here.

 

Gunther the German Shepard recently had a "meeting with the real estate agents selling his Miami mansion that his handlers bought from Madonna." 

According to the handlers who manage the estate, Gunther VI inherited a "vast fortune," which includes the eight-bedroom waterfront home that Madonna once owned, from his grandfather Gunther IV. 

The Tuscan-style villa comes with a view of Biscayne Bay, and went on sale Wednesday for $31 million, which is a major increase in purchase price as Madonna purchased the same home for $7.5 million. 

Gunther VI's lineage dates back "decades to when Gunther III inherited a multimillion-dollar trust from late owner German countess Karlotta Liebenstein when she died in 1992. . .Since then, a group of handlers have helped maintain a jet-setting lifestyle for a succession of dogs," which includes Gunther IV. 

Not only does Gunther get to enjoy trips to Milan and the Bahamas, the pooch also has a personal chef that cooks breakfast each morning made of the "finest meat, fresh vegetables, and rice." 

See Kelli Kennedy, Millionaire pooch selling Miami villa once owned by Madonna, My San Antonio, November 17, 2021. 

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

ACTEC Shares Useful Resources

Below are some helpful resources from The American College of Trust and Estate Counsel, ACTEC, for estate planners and your clients.

ACTEC Trust and Estate Talk  (podcast series for professionals)

An Overview of Tennessee Trust Law - A review of changes to Tennessee trust laws that make the state a desirable trust jurisdiction, streamlined trust statutes, and made it difficult for creditors.​

ACTEC Family Estate Planning Guide (video library for the general public)

Estate Tax Returns - This video offers a step-by-step overview of estate tax preparation and filing process, including what clients need to know about the estate tax return, the extension, the exemption, and the IRS timeline for closing.