Wills, Trusts & Estates Prof Blog

Warren Buffett Gives Us a Preview of His Will

In an interview with The Wall Street Journal, Buffett—the chairman and chief executive of Berkshire Hathaway—said that after his death nearly all of his remaining wealth will go to a new charitable trust overseen by his daughter and two sons. The legendary investor also made clear his giving to the Bill & Melinda Gates Foundation, to which he has donated billions, will come to an end. 

His three children must decide unanimously which philanthropic purposes the money then goes to serve. Buffett, who is 93 years old, said he hasn’t laid out marching orders for Susie, Howie and Peter Buffett. But he shared his personal perspective about giving. Buffet instructed his children to "help the people that haven't been as lucky as we have been" and has done so already through the Gates Foundation, as well as 4 other foundations connected to his family. 

Buffett served as a trustee of the Gates Foundation until 2021; he resigned less than two months after the couple announced their plans to divorce. Melinda French Gates recently resigned from the foundation, with her last day earlier this month. Buffett declined to say how long his estate plan had been in place. He described its contours in a November press release about supplemental gifts of Berkshire shares to the four family foundations. 

For more information see Karen Langley "Warren Buffett Gives Us a Preview of His Will", The Wall Street Journal, June 28, 2024.

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

Study on caregivers finds brief bouts of lucidity are common among people with dementia

NIA-funded researchers conducted in-depth interviews with caregivers to document how many witnessed an unexpected, temporary return of mental clarity to individuals with advanced dementia. For this study, a team lead by researchers at the University of Pennsylvania sought to build on previous work examining the quantifiable aspects of lucid episodes, such as frequency, duration, and proximity to death. The goal was to better define and describe episodes of lucidity, given the pervasiveness seen in previous research.

Among the 30 caregiver participant interviews, 25 included descriptions of a total of 34 lucid episodes. The family members often called the lucid episodes a small, positive “blip” in an otherwise negative downward journey with their loved one. An episode tended to be the mentioning of a single word, a gesture, or a facial expression that gave the caregiver a sense the individual’s mind was momentarily back to normal. 

Among all participants, most caregivers reacted positively to the lucid episode. However, consistent with previous research, this study showed that caregivers did not typically discuss episodes of lucidity with health care professionals because they were unsure if the information would be useful. The researchers noted that for many caregivers, the lucid episodes affected their day-to-day approaches to care and helped justify ongoing care efforts, suggesting that clinicians should be encouraged to solicit whether caregivers have witnessed such events.

For more information see "Study on caregivers finds brief bouts of lucidity are common among people with dementia", National Institute on Aging, June 6, 2024. 

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

Democrats’ Billionaire Taxes Still Have a (Slight) Chance

The Supreme Court has left a very narrow legal path open for the billionaire taxes that are central to the Democrats' economic agenda. In a recent international-tax case related to the 2017 tax law, the court avoided ruling on whether the 16th Amendment mandates that income taxes apply only to realized income. Instead, the court upheld a tax on U.S. shareholders’ portion of a foreign company’s earnings based on Congress’s power to attribute an entity’s realized income to its owners. Justice Brett Kavanaugh, writing for the majority, noted that the issue of realization was not resolved, leaving the door open for future legal challenges.

Democrats, aiming to address wealth inequality and seeking new revenue sources, hope to tax billionaires on the appreciation of their stock values even if those assets are not sold. The court's limited ruling provides a glimmer of hope for progressives, but four justices explicitly ruled out such taxes, and the majority acknowledged unresolved questions. Any new legislation would face significant hurdles, including whether it can pass Congress and survive legal scrutiny over taxing unrealized income. Conservative groups, like the Buckeye Institute, argue that there are significant legal constraints that would prevent the application of a wealth tax.

The current composition of the Supreme Court presents a formidable obstacle for advocates of taxing unrealized gains. Four justices—Barrett, Alito, Thomas, and Gorsuch—have expressed that the 16th Amendment requires realization. Meanwhile, Justice Ketanji Brown Jackson contends that the amendment does not mandate such a requirement. This split puts proponents in a difficult position, as they must convince both Kavanaugh and Chief Justice Roberts, in addition to the three most liberal justices, to uphold any novel tax concept. Despite past legislative failures, Democrats, including President Biden and Senator Ron Wyden, continue to push for taxing unrealized gains, viewing the current system as flawed. They propose various measures to address political and administrative challenges, aiming to close loopholes and ensure that the wealthiest individuals contribute their fair share.

For more information see Richard Rubin "Democrats’ Billionaire Taxes Still Have a (Slight) Chance", The Wall Street Journal, June 22, 2024.

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

Article: How Wrongful Death Statutes Can Kill an Estate Plan: Part 1

Noel Brock (Eastern Michigan University) recently published, How Wrongful Death Statutes Can Kill an Estate Plan: Part 1, 2024. Provided below is an Abstract:

Parents do numerous things for their minor children - both tangible and intangible. Parents provide minor children with food and shelter and do what they can to keep them in good health. They also do all they can to ensure their children are educated. Beyond these tangible things, parents try to pass on their values and teach their children their religious beliefs. When only one parent dies or becomes incapacitated, the surviving parent generally carries on this role. When both parents either die or become incapacitated while their child is still a minor, the child needs a substitute parent. A guardian assumes the responsibilities of the parent in such situations. A minor child guardianship occurs when an adult (the ‘guardian‘) is named by a state court judge to care for an unemancipated minor (the ‘ward‘ or ‘minor child‘) whose parents are unable or unwilling to care for the child. Once appointed, the guardian has the same rights and obligations under the law as a parent.

However, a guardianship of an unemancipated minor does not become effective until the occurrence of some event renders both parents unable to serve as the guardian (usually death or disability of the parents). Thus, it is critical for parents to name a guardian, and perhaps one or more alternative guardians in both their will (in the event of their death) as well as in a durable power of attorney (in the event they become incapacitated while living).

The U.S. Supreme Court has repeatedly held that it has no jurisdiction under the United States Constitution to consider the issue of minor guardianship (essentially making the issue an issue reserved to the States). While each State's laws vary, they all use the same guiding principle in naming a guardian of a minor child - best interest of the child. When a minor child is left parentless (whether by death or incapacity of both parents), a state court judge decides who will be the guardian of that minor child. If the parent(s) left a will or durable power of attorney that names a preferred guardian, the judge typically gives the parents' preferences great weight. That said, the judge will always consider the best interest of the child in naming a guardian - even one chosen by the deceased parents - and can override the guardian named in the will or durable power of attorney if the judge deems someone else to be better for the child.

While not legally binding on a court deciding guardianship of a minor child, most estate attorneys advise their clients to name guardians for any minor children upon their death (in a will) or upon their incapacity (in a durable power of attorney). When naming a guardian, parents typically, and rightfully, consider who would be the best person to raise the minor child if they were not here. Parents also typically set up one or more trusts to pass property to for the benefit of a minor child (or minor children). What most parents do not think of, or maybe do not realize, is that there are certain categories of property that pass outside of probate and not pursuant to the will (or pursuant to intestate succession if the parent dies without a will). In some states, for example, wrongful death lawsuit recoveries pass not pursuant to the testator's will or pursuant to intestate succession laws, but instead pass outside of probate to a list of potential takers decided upon by State legislators. If the parents of minor children die in such a manner to give rise to a wrongful death lawsuit in such a State, any recovery from that lawsuit will not pass pursuant to the testator's will or pursuant to State law intestate succession. Instead, a state court judge or jury will ultimately decide who among the potential takers will receive part or all of the wrongful death recovery. Moreover, and importantly, the guardian(s) of the minor children will be responsible for overseeing those monies until the minor children reach the age of majority.

Article: Decentralization of Action by the Ministry of Childhood and Adolescence: The Participation of DICUIDA in Paraguay in Judicial Cases

Janin Natalia Orzusa Falcón (Consejo de la Magistratura) recently published, Decentralization of Action by the Ministry of Childhood and Adolescence: The Participation of DICUIDA in Paraguay in Judicial Cases, 2024. Provided below is an Abstract:

DICUIDA is a department of the Ministry of Children and Adolescents, created with the purpose of ensuring compliance with the Law in favor of the best interests of children and adolescents. This work seeks to establish its efficiency through the decentralization of said agency at the national level, in the different judicial districts of the country, to support the Courts of First Instance for Children and Adolescents in child protection.

This is a translation, the original article is in Spanish. 

Retirees’ Life Savings Can Vanish in Continuing Care Bankruptcies

Continuing care retirement communities (CCRCs) promise lifetime housing and care for seniors, often requiring substantial upfront deposits with the assurance of refunds if the resident moves or passes away. However, your life savings are at risk when CCRCs file for bankruptcy. Since March 2020, at least 14 such facilities in the U.S. have declared bankruptcy, jeopardizing the financial security of their residents. This trend highlights a significant, often overlooked, risk for seniors who rely on these communities for their long-term care needs.

The financial instability of CCRCs stems from various factors, including mismanagement and market pressures. For example, residents of Henry Ford Village, a CCRC in Michigan, faced the potential loss of their deposits when the facility declared bankruptcy in 2020. These financial collapses can devastate retirees, many of whom have invested their entire life savings into securing a place in these communities, believing it would be their last move.

The impact of CCRC bankruptcies extends beyond financial losses. Residents and their families face significant emotional and logistical challenges, including the stress of finding new accommodations and care. The complex nature of bankruptcy proceedings often leaves them uncertain about the recovery of their funds. As the prevalence of these bankruptcies grows, it underscores the need for better regulation and oversight to protect the financial and personal well-being of the aging population​.

For more information see Akiko Matsuda "Retirees’ Life Savings Can Vanish in Continuing Care Bankruptcies",  The Wall Street Journal, June 13, 2024. 

National Archives and Ancestry team up to digitize millions of records

The National Archives and Records Administration (NARA) has partnered with Ancestry to digitize tens of millions of historical records, significantly expanding public access to these documents. This agreement, described as the largest archive collaboration for Ancestry to date, involves digitizing collections previously unavailable online, including World War II military reports, Korean War draft cards, and immigration and naturalization records. The collaboration aims to make an initial 65.5 million records accessible on Ancestry’s platform within the next two years, eventually integrating these records into the publicly accessible National Archives database​.

This initiative builds on a longstanding partnership between NARA and Ancestry, which has been active since 2008. The new agreement includes placing Ancestry technicians and scanning machines at NARA facilities to expedite the digitization process. Key collections slated for digitization include INS passenger and crew arrival and departure lists and death notices of U.S. citizens abroad. This enhanced digitization effort is designed to overcome geographic barriers, making these valuable records accessible to researchers and families nationwide​.

The project also complements NARA's broader goal of digitizing 500 million pages of records by 2026. The digitization will take place at various National Archives facilities, including those in Denver, St. Louis, and San Bruno, with the scanning of military naturalization petitions beginning soon. This effort not only preserves historical data but also fills gaps left by past events, such as the 1973 fire that destroyed millions of military records. The collaboration underscores a shared commitment to preserving and democratizing access to America’s rich historical heritage​.

For more information see Michael E. Ruane "National Archives and Ancestry team up to digitize millions of records" The Washington Post, May 9, 2024. 

Special thanks to Deborah Matthews (Virginia Estate Planning Attorney) for bringing this article to my attention.

Managing an Inheritance: When 'Mom's Money' Becomes Yours

Millennials are set to inherit a substantial amount of wealth over the next two decades, as the silent generation and baby boomers transfer their assets. This shift, amounting to an estimated $90 trillion, could significantly impact millennials' financial futures. However, many millennials might not receive as much as they anticipate. A disconnect exists between millennials' expectations and the actual amounts boomers plan to leave, often due to high healthcare costs that diminish potential inheritances​.

The influx of wealth can create both opportunities and challenges for millennials. Financial advisers note that many young inheritors are unprepared to manage large sums of money, leading to potential stress and financial mismanagement. Guidelines for managing inheritances typically recommend spending a small portion on personal enjoyment, donating to charity, and prioritizing significant financial goals such as debt repayment or home purchases​​.

Despite the potential for increased wealth, millennials face unique economic pressures, including student debt and an inaccessible housing market. The financial confidence among this generation remains low, partly due to economic instability witnessed during their formative years. This cautious approach could either hinder their financial growth or safeguard against reckless spending, depending on individual perspectives and preparedness​.

For more information see "Managing an Inheritance: When 'Mom's Money' Becomes Yours", The New York Times, June 8, 2024. 

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

US Supreme Court sidesteps wealth tax question in closely watched case

The US Supreme Court avoided ruling on the constitutionality of a wealth tax, disappointing both supporters and opponents. In a 7-2 decision, the court sidestepped the issue in a case involving a couple, the Moores, who contested a $15,000 tax on offshore profits, arguing it was an unconstitutional tax on unrealized gains. The court's narrow ruling, which did not resolve whether income must be "realized" to be taxed, left future wealth tax debates open, with justices expressing varied opinions on the matter.

Justice Brett Kavanaugh, writing for the majority, stated that the court did not need to address the disagreement over the requirement of realization for income taxation in this case. The dissenting justices, Clarence Thomas and Neil Gorsuch, argued that the Constitution only permits taxes on realized income, as per the 16th Amendment. Meanwhile, Justices Amy Coney Barrett and Samuel Alito agreed with the ruling but supported the need for income realization, contrasting with Justice Ketanji Brown Jackson's opinion that realization is not required.

Tax experts and campaigners had closely watched the case, hoping for a definitive ruling that could influence future wealth tax policies. The decision, which avoided challenging other existing taxes on unrealized gains, left both sides partially satisfied. It highlighted the court's cautious approach to potentially sweeping tax law changes, setting the stage for continued legal battles over the constitutionality of taxing unrealized income.

For more information see Stephen Foley "US Supreme Court sidesteps wealth tax question in closely watched case", The Financial Times, June 20, 2024.

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

Supreme Court upholds Trump-era tax provision on offshore earnings

The Supreme Court is currently deliberating a pivotal case that challenges the constitutionality of a tax provision from the 2017 Tax Cuts and Jobs Act, known as the Mandatory Repatriation Tax (MRT). This tax targets the profits of U.S. shareholders from foreign corporations, regardless of whether the earnings were distributed. The case, Moore v. United States, was brought forth by Charles and Kathleen Moore, who argue that the MRT constitutes a property tax rather than an income tax, which would make it unconstitutional under the U.S. Constitution's restrictions on federal property taxes.

The justices are scrutinizing the broader implications of their ruling. A decision against the MRT could significantly impact not only this specific tax but also future legislative efforts to impose wealth taxes on unrealized gains. Both conservative and liberal justices have expressed skepticism about completely dismantling the MRT, yet they also appear wary of granting the government unrestricted power to define and tax income in ways that could open the door to new forms of taxation, including a wealth tax.

The debate has intensified due to the potential financial and policy repercussions. Should the Court strike down the MRT, it could result in substantial tax refunds for major corporations and disrupt current and future tax policies aimed at wealthier Americans. This case has attracted attention from various political and economic groups, emphasizing the high stakes involved in the Court's decision, which could reshape the landscape of U.S. tax law.

Ultimately, the Supreme Court seems to be leaning towards a narrow ruling that would uphold the MRT while avoiding a broader decision that might preempt future wealth tax legislation. This approach aims to balance the need to maintain existing tax frameworks with the caution against overextending federal taxing authority​.

For more information see Ann E. Marimow and Julie Zauzmer Weil "Supreme Court upholds Trump-era tax provision on offshore earnings", The Washington Post, June 20, 2024. 

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