Wills, Trusts & Estates Prof Blog

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

Monday, June 17, 2019

Article on ‘Sham Trusts’ and Ascertaining Intentions to Create A Trust

TrustsYing Khai Liew published an Article entitled, ‘Sham Trusts’ and Ascertaining Intentions to Create A Trust, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

According to received wisdom, ‘sham trusts’ is a doctrine which provides an exception to the normal objective process of ascertaining intentions to create a trust by permitting courts to give effect to subjective intentions as the ‘true’ intention. This article makes three points. First, that approach does not properly reflect how courts deal with sham trusts: courts are not concerned with ascertaining subjective intentions when dealing with ‘sham trusts’. Second, ‘sham trust’ cases are but specific factual applications of a general approach, namely that an objective intention to create a trust is ascertained from any admissible evidence accepted by the court as being relevant to its inquiry. Thus, there is no separate ‘sham trust’ doctrine, and therefore no special requirements to be fulfilled (such as an intention to deceive) for legal effect to be withheld from a trust instrument. Third, the general approach can be particularised in the form of a flexible framework, which explains how courts deal with the admissible evidence. While any relevant evidence is admissible, certain types of evidence are given more weight than others.


June 17, 2019 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Friday, June 14, 2019

Note on Reading the Tea leaves: Sifting Through Jicarilla and Garner to Construct a Workable Fiduciary Exception Framework for ERISA Insurers

InsuranceTed A. Hages published a Note entitled, Reading the Tea leaves: Sifting Through Jicarilla and Garner to Construct a Workable Fiduciary Exception Framework for ERISA Insurers, 80 U. Pitt. L. Rev. 409-455 (2018). Provided below is the introduction to the Note.

Mark secures a new manager-level job with a $200,000 base salary and a guaranteed bonus of $300,000 for his first full year of employment. His employer also offers a competitive benefits package, which includes a long-term disability plan. Unfortunately, after only three months on the job, Mark gets into a terrible bicycling crash, rendering him permanently disabled.

Mark informs human resources that he will be applying for disability benefits under the disability plan, but he is told that the administration of the plan has been outsourced to an insurance company. He applies for disability benefits with the insurer responsible for evaluating his eligibility for benefits under the plan and paying them if appropriate. The insurer approves Mark's claim, but deems him eligible for a monthly benefit payment based on only his $ 200,000 base salary. Feeling cheated, Mark files an appeal arguing that his benefits should be based on his total compensation of $ 500,000. The insurer denies his appeal, stating that he did not work a full year prior to the accident and any bonus paid to him would be mere goodwill by his employer.

Mark decides to sue the insurance company. During discovery, he requests to see a memo written by the insurance company's lawyer for the claims analyst that oversaw Mark's claim. The insurer, however, contends that this memo is protected by the attorney-client privilege.

What happens next, strangely enough, depends on where the suit takes place. If Mark's claim is litigated in a federal court in Pennsylvania, New Jersey, or Delaware, then Mark is out of luck. His request to compel production of the memo will be automatically rejected. But, if he happens to be on the West Coast, he will automatically prevail through a common law fiduciary exception to the attorney-client privilege. If he is somewhere in between, the result is uncertain.

This inconsistency and uncertainty in the law denotes a current circuit split in the federal courts of appeal. The Third and Ninth Circuits disagree as to whether a beneficiary of an employee benefit plan can defeat an insurer's assertion of the attorney-client privilege, where the insurer is tasked with evaluating and paying benefit claims as a third-party claims administrator. In the Ninth Circuit, beneficiaries automatically defeat the privilege pursuant to Ninth Circuit caselaw on the fiduciary exception to the attorney-client privilege, and in the Third Circuit, just the opposite. Where the fiduciary exception applies, it precludes fiduciaries who obtain legal advice in the execution of their fiduciary obligations from asserting the attorney-client privilege against their beneficiaries. No circuit beyond the Third and Ninth has yet examined this issue, leaving much uncertainty for benefit plan participants and insurer-fiduciaries across the country.

Many perspectives have been written on whether the Ninth or Third Circuit "got it right," in holding the fiduciary exception per se applicable to insurers and per se not, respectively. This Note, however, focuses not on which court came to the right result, but rather, it scrutinizes the underlying legal framework that allowed the courts to divide. After reviewing the basic doctrinal test--a two-rationale framework which determines the fiduciary exception's applicability--and how it has been applied both historically and in the circuit split, this Note "reads the tea leaves" that is an uncertain fiduciary exception jurisprudence in an effort to establish uniformity. This is accomplished by a two-part solution. First, this Note extracts the key principles from the Supreme Court's only fiduciary exception case to define the proper doctrinal elements for each part of the two-rationale framework. But even if the courts are in accord as to the exact legal test by which the fiduciary exception should be applied, uncertainty still remains given the pliability of that framework. To resolve this shortcoming, a new prong to the fiduciary exception test for ERISA insurers is proposed: a good cause prong, borrowed from the shareholder derivative suit context, but modified so that the insurer bears the burden of showing cause for nondisclosure.

Part I of this Note provides background on the fiduciary exception. Part I-A traces the doctrine's trust law origins, whereby the two-rationale framework was established as the legal test for the exception. Part I-B discusses how that test has been extended, focusing on its use in shareholder derivative suits through the Garner doctrine. Part II explores the fiduciary exception in ERISA cases, with Part II-A covering trustee-like ERISA cases. Part II-B dives into an ERISA context where the doctrine has not been so easily applied: the insurer-fiduciary context of the circuit split. Part II-C discusses the uncertainty surrounding the split and its causes. Finally, Part III offers a two-part solution to rework the doctrine. In Part III-A, the Supreme Court's Jicarilla decision is probed to establish the proper elemental tests for the two-rationale framework. Part III-B then proposes a new doctrinal prong for the fiduciary exception framework in the ERISA insurer context: a good cause prong deriving from Garner, but with a modified burden standard.

June 14, 2019 in Articles, Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally | Permalink | Comments (0)

Thursday, June 13, 2019

Article on Historic Partition Law Reform: A Game Changer for Heirs’ Property Owners

CourtThomas W. Mitchell recently published an Article entitled, Historic Partition Law Reform: A Game Changer for Heirs’ Property Owners, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Over the course of several decades, many disadvantaged families who owned property under the tenancy-in-common form of ownership – property these families often referred to as heirs’ property – have had their property forcibly sold as a result of court-ordered partition sales. For several decades, repeated efforts to reform state partition laws produced little to no reform despite clear evidence that these laws unjustly harmed many families. This paper addresses the remarkable success of a model state statute named the Uniform Partition of Heirs Property Act (UPHPA), which has been enacted into law in several states since 2011, including in 5 southern states. The UPHPA makes major changes to partition laws that had undergone little change since the 1800s and provides heirs’ property owners with significantly enhanced property rights. As a result, many more heirs’ property owners should be able to maintain ownership of their property or at least the wealth associated with it.

June 13, 2019 in Articles, Current Affairs, Disability Planning - Property Management, Estate Administration, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Wednesday, June 12, 2019

Article on Bankruptcy Fiduciary Duties in the World of Claims Trading

FiduciarydutyJohn A. E. Pottow recently published an Article entitled, Bankruptcy Fiduciary Duties in the World of Claims Trading, 13 Brook. J. Corp. Fin. & Com. L. 87-98 (2018). Provided below is an abstract of the Article.

In earlier work, I explored the role of fiduciary duties in the bankruptcy trustee's administration of a debtor's estate, noting the absence of any explicit demarcation of those duties in the Bankruptcy Code. In this piece, I report the highlights of that analysis and see to what extent (if any) fiduciary duties can inform policy prescriptions for the issue of bankruptcy claims trading, colorfully referred to by some as the world of "bankruptcy M&A." My initial take is pessimistic. Fiduciary duties, at least as traditionally conceived in bankruptcy, are unlikely to provide much help. But there is still a source of optimism. Namely, the structural and procedural institutions of the Bankruptcy Code and court system may, through a transparent, court-supervised litigation process, achieve many of the same conflict-checking functions with which fiduciary duty law concerns itself.

June 12, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Tuesday, June 11, 2019

Article on For Love and Affection: Elder Care and the Law's Denial of Intra-Family Contracts

ElderlawNina A. Kohn recently published an Article entitled, For Love and Affection: Elder Care and the Law's Denial of Intra-Family Contracts, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

As the U.S. population ages, demand for care providers for older adults is rapidly growing. Although the law’s treatment of care contracts between older adults and their family caregivers has substantial implications for the country’s ability to meet this demand, there has been no prior empirical examination of the law’s current treatment of such agreements. This Article fills that gap by assessing how courts and other legal actors treat intra-family agreements to pay family members for elder care. A look into a long-ignored area of case law— Medicaid eligibility determinations—reveals that courts, administrative law judges, and state regulators typically attach little or no monetary value to elder care provided by family members. Rather, payments for caregiving are routinely treated as fraudulent transfers. The result is that, in the name of combatting Medicaid fraud, states penalize older adults who pay for their own care.

Treating family-provided elder care as lacking monetary value stands in sharp contrast to the high cost of elder care purchased on the open market and is at odds with states’ increased willingness to directly pay family care providers. This Article shows that this incongruence can be partially explained by public distaste for Medicaid planning and distrust of agents acting on behalf of older adults. Entrenched stereotypes about care work and related expectations about familial care also contribute to the law’s refusal to recognize these agreements and the economic value of care provided under them.

This Article offers lessons for social policy, legal theory, and legal practice. On a policy level, it shows that states are engaged in counterproductive behavior that will discourage the very type of family care they purport to encourage. On a theoretical level, it indicates that attitudes toward care work and courts’ willingness to enforce contracts between family members have not changed to the extent commonly described by family law scholars. Finally, at a practical level, it suggests that attorneys should adapt the advice they give clients to better account for distrust of agents.

June 11, 2019 in Articles, Current Events, Disability Planning - Health Care, Elder Law, Estate Planning - Generally | Permalink | Comments (0)

Monday, June 10, 2019

Article on Trust Law: Private Ordering and the Branching of American Trust Law

Trusts2John Morley & Robert H. Sitkoff recently published an Article entitled, Trust Law: Private Ordering and the Branching of American Trust Law, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

In this chapter, prepared for The Oxford Handbook of New Private Law, we identify the principal ways in which the common law trust has been used as an instrument of private ordering in American practice. We argue that in both law and function, contemporary American trust law has divided into distinct branches. In our taxonomy, one branch involves donative trusts and the other commercial trusts. The donative branch divides further to include separate sub-branches for revocable and irrevocable donative trusts. We explain the logic of this branching in both practical function and doctrinal form.

June 10, 2019 in Articles, Books - For Practitioners, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, June 9, 2019

Article on Evaluating the Legality of Age-Based Criteria in Health Care: From Nondiscrimination and Discretion to Distributive Justice

NursinghomeGovind Persad recently published an Article entitled, Evaluating the Legality of Age-Based Criteria in Health Care: From Nondiscrimination and Discretion to Distributive Justice, 60 B.C. L. Rev. 889-949 (2019). Provided below is the abstract for the Article.

Recent disputes over whether older people should pay more for health insurance, or receive lower priority for transplantable organs, highlight broader disagreements regarding the legality of using age-based criteria in health care. These debates will likely intensify given the changing age structure of the American population and the turmoil surrounding the financing of American health care. This Article provides a comprehensive examination of the legality and normative desirability of age-based criteria. I defend a distributive justice approach to age-based criteria and contrast it with two prevailing theoretical approaches to age-based criteria, nondiscrimination and discretion. I propose a detailed normative framework for the use of age-based criteria in health care, the lifetime justice approach, that considers the future life patients can gain from treatment and the past years of life they already have experienced.

June 9, 2019 in Articles, Current Affairs, Estate Planning - Generally | Permalink | Comments (0)

Saturday, June 8, 2019

Note on Transgender Beneficiaries: In Becoming Who You are, Do You Lose the Benefits Attached to Who You Were?

TransAshleigh C. Rousseau recently published a  Note entitled, Transgender Beneficiaries: In Becoming Who You are, Do You Lose the Benefits Attached to Who You Were?, 47 Hofstra L. Rev. 813-859 (2018). Provided below is an introduction of the Note.

Suppose William Smith, father of Joseph Smith, executes a will to leave his estate to his children. In his will, the phrase "to my son, Joseph" is used, preceding a bequest for the property. Before William dies, Joseph embraces her transgender identity, obtains a lawful name change to Julia, obtains a lawful gender marker change, and undergoes sex confirmation surgery. William dies, and his estate is divided. Is Julia still entitled to Joseph's portion of William's estate? In embracing her transgender identity, is she deprived of her right to inherit? 

The transgender identity and its relatives (transsexualism, non-conforming gender identities, and the like) are often misunderstood by the general population. As a result, transgender individuals are subject to both systemic and individual discrimination. It is in the midst of this misunderstanding that transphobia is born. Transphobia is "the ignorance, fear, dislike, and/or hatred of trans* people, which may be expressed through name-calling, disparaging jokes, exclusion, rejection, harassment, violence, and many forms of discrimination." Transphobic behaviors also include refusing to use a person's preferred noun/pronoun and the denial of services, employment, housing, and other essentials. M. Dru Levasseur states that "the source of much transphobia is a fear of difference." Cisgender individuals often maintain the lurking notion that transgender individuals are trying to be someone they biologically are not, and thus have difficulty accepting transgender individuals for who they identify as. As a community, we must recognize and respect the self-identities that transgender individuals put forth in order to break down these walls that isolate and marginalize the transgender community. Contrary to some conservative beliefs, transgender individuals do not violate the social order, nor is gender confined within the boundaries of binary sex that society recognizes. In order "for transgender people to be recognized as full human beings under the law, the legal system must make room for the existence of transgender people - not as boundary-crossers, but as people claiming their birthright as a part of the natural variation of human sexual development."

This Note explores the implications of not only a name change but also a change in gender for a beneficiary named in a will using their previous identity. Raising a question, may a transgender individual accept their bequest under the will when a decedent names a transgender individual as a beneficiary and uses that individual's birth name and gender? This Note will first talk about being transgender and the social and legal obstacles that transgender individuals face on a regular basis. It will then explore the obstacles presented if their transition occurred after a will was written using their previous identity.

June 8, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Wills | Permalink | Comments (0)

Friday, June 7, 2019

The Family Constitution

Family_ConstitutionAllison Anna Tait of the University of Richmond School of Law has recently posted her article on SSRN entitled Is My Family Constitution Unconstitutional?  Here is the abstract of her article:

Every high-wealth family should write a constitution, at least that’s what wealth managers say. Because, “[w]ithout careful planning and stewardship, a hard earned fortune can easily be dissipated within a generation or two.” A family constitution, as the name implies, is a governance document that high-wealth families create, setting forth the rules that family members will adhere to in order to protect the family fortune from various kinds of creditor claims, family feuds, and reckless investments. Wealth advisors recommend basing family constitutional design on political constitutions, in particular the United States Constitution. Nevertheless, the financial planning discourse never addresses one critical question: how successful is the analogy? This brief Article posits that the analogy between the two types of constitutions is imperfect in several significant ways and mainly because family constitutions largely ignore some of the core principles that animate a democratic constitution.

June 7, 2019 in Articles, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, June 4, 2019

Perpetual Conservation Easements

Conservation_easementVictoria Wolfe has recently published her Note entitled BC Ranch II v. Commissioner: a flexible approach to perpetual conservation easements, 94 Ind. L.J. 331 (2019). Here is her summary of her Note:

In Part I, this Note explores the federal charitable income tax deduction for conservation easements and the legislative purpose in enacting the perpetuity requirements. Part II examines the Fifth Circuit's decision in BC Ranch II and the flexible approach to perpetuity adopted by the court. Finally, Part III considers the implications of the BC Ranch II decision, specifically authority to monitor conservation easements, valuation gaming of easements in the context of perpetuity, and congressional intent in allowing the conservation easement deduction. Part IV addresses the main arguments against adopting a flexible approach to the easement deduction. Overall, this Note argues that a flexible interpretation of perpetuity by the IRS and the courts strikes the proper balance between respecting congressional intent and encouraging conservation efforts.

June 4, 2019 in Articles, Estate Planning - Generally | Permalink | Comments (0)