Wills, Trusts & Estates Prof Blog

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

Thursday, July 18, 2019

Love is Lovelier the Second Time Around: 11 Tips to Keep it That Way

WeddingcakeOld Blue Eyes, the one and only Frank Sinatra, serenaded the words "love is lovelier, the second time around." But the reality is that the rate of divorce of second marriages are even higher than first ones, coming in at 67%. Planning is necessary to beat the odds, and financial planning should definitely be considered.

Here are 11 thinks to remember to keep your second love as your last love.

  • Be honest about your financial situation.
    •  Let your future spouse know all the details about your assets, your debts, and things that may occur upon remarriage - such as loss of alimony.
  • Communicate your desire to support children, friends, or an aging relative.
    • If you are paying for an adult child or aging parent, make your future spouse aware of it.
  • Open a joint checking account.
    • This is a practical way of unifying your lives together.
  • Account for differences in income.
    • If there is a large disparity in incomes, each person paying 50% of the household bills could put one party at a great disadvantage.
  • Have monthly planning meetings and pay your bills together.
    •  This does not have to be perpetual arrangement, but at least for the first few years start a habit of getting together solely to pay your bills and talk about each other's financial goals.
  • Have a written plan on how to pay for education.
    •  If one person has already put a child through college solo then gains a stepchild that is in middle school, they may be less willing to contribute as much, so an honest discussion is necessary.
  • Establish a “Yours, Mine, Ours”.
    • Some people may want to have joint assets while also maintaining individual ownership of pre-marital assets.
  • Consider a pre-nuptial agreement.
    •  Though the document may seem like a passion killer, it can be wise protection for both partners.
  • Set up revocable trusts for pre-marital assets.
    • Some may consider this a devious way to keep assets away from a new spouse, but it is more likely a way for you to protect your children from whatever the future may bring, such as an evil step parent.
  • Consider life insurance to equalize your estates.
    •  This can ease any tension if one partner has a much larger estate to pass on to their children compared to the other spouse.
  • Jointly hire a financial adviser.
    •  By both spouses signing the paperwork, it can prove that the advice and planning does not favor one partner over the other.

See Mark Avallone, Love is Lovelier the Second Time Around: 11 Tips to Keep it That Way, Forbes, July 17, 2019.

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

July 18, 2019 in Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Tuesday, July 16, 2019

Comment on What's Equitable Adoption Got to Do With It?: An Examination of Texas' 2017 Amendment and its Impact on Inheritance Rights

TexasLeah Towe recently published a Comment entitled, What's Equitable Adoption Got to Do With It?: An Examination of Texas' 2017 Amendment and its Impact on Inheritance Rights, 71 Baylor L. Rev. 239-266 (2019). Provided below is an [] of the Comment.

The practice of adoption dates back to ancient times, as biological parents have transferred their children to other adults who wanted the children for "love, labor, and property." Many historians have traced adoption in the United States to Massachusetts' passage of the first "modern" adoption law in the 1850s. Specifically, the Massachusetts Adoption of Children Act promoted the notion that adoption should benefit the welfare of children, rather than adult interests. Since Massachusetts' initial law, all other states continue to implement and reform legislation governing adoptions. As times change and family dynamics evolve, many states have evolved as well, allowing for adoption outside of the statutory, legal process under certain facts and circumstances. The right facts and circumstances often result in a posthumous adoption out of equity, also known as equitable adoption.

Texas has recognized the concept of equitable adoption since the 1930s. While the plain language of the relevant statute has long suggested that equitably adopted children should be treated the same as legally adopted children and natural children for inheritance purposes, the Texas Supreme Court has refused to interpret the statute this way. In response, Texas lawmakers in the 85th Legislative Session of 2017 proposed and passed House Bill 2271 (H.B. 2271), which amended the definition of "child" in Section 22.004 of the Estates Code to include equitable adoption. H.B. 2271 also added a subsection to Section 201.054 to define "adopted child." With these changes, Texas lawmakers have expressed their intent to finally provide the same inheritance rights to both legally adopted children and equitably adopted children.

This Comment will briefly provide some background on the history of adoption in Texas; the history and evolution of equitable adoption in Texas; insight into the 85th Texas Legislature's 2017 amendment, as it could impact intestate succession - and by relation, testate succession and other inheritance rights - in the future; predictions regarding Texas courts' likely response to this amendment; and finally, a peek into the shortcomings of this amendment.

July 16, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Handbook of Practical Planning for Artists, Art Collectors, and Their Advisors

Slugg2Ramsay H. Slugg recently published a Book entitled, Handbook of Practical Planning for Artists, Art Collectors, and Their Advisors (2d ed. 2019). Provided below is a summary of the book.

Art is an asset of passion, as author Ramsay H. Slugg states, yet it also has unique and important financial characteristics. This makes art possibly the most difficult asset to incorporate into an overall estate and financial plan. Handbook of Practical Planning for Artists, Art Collectors and Their Advisors addresses two essential elements of art ownership: planning for the ultimate disposition of the art, including how to address the wealth represented by the art into any estate and financial planning, and also the practical considerations for collectors as they actively collect and plan for the art’s eventual disposition.

After a brief discussion of the art market generally, the book introduces and explains a client-focused process I use when advising art collectors. This process includes explaining both the income, estate and gift tax consequences of various options, as well as the important and often emotional non-tax considerations of collecting and disposing of art. The book also discusses the role and importance of other advisors who are involved in these decisions, including art advisors, risk management professionals and appraisers. To better illustrate the material, the book features enlightening case studies.

July 16, 2019 in Books - For Practitioners, Current Affairs, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Wednesday, July 10, 2019

Article on The Prudence of Passivity: An Argument for Default Passive Management in Trust Investing

ResponsibletrusteeBryon W. Harmon & Laura A. Fisher recently published an Article entitled, The Prudence of Passivity: An Argument for Default Passive Management in Trust Investing, ACTEC L.J. Vol 44, No. 2, 147-182 (Spring 2019). Provided below is an abstract of the Article.

Trustees, like all investors, are exposed to a wide-ranging marketplace of investment vehicles, techniques, strategies, and theories. Trustees have a threshold choice to make with respect to the manner in which trust assets are to be invested. Active management - historically, a conventional approach - aims to "beat the market" and surpass benchmark returns by picking and choosing among individual securities based on the trustee's determinations that they are mispriced (i.e., undervalued) and/or by timing transactions based on forecasting. Alternatively, trustees may choose to simply invest in and own entire markets, or asset classes, and accept overall market returns by using low cost asset class index funds. This latter approach is known as passive investing, or indexing.

This article traces both the historical development of financial scholarship regarding investment practices and legal scholarship addressing the evolution of fiduciary duties. It then reviews the modern prudent investing rules governing trust investment and explores several major issues: (1) whether a passive approach is encouraged or even required by law, (2) why so few professional trustees seem to employing passive investment management and (3) whether recent case law focusing on the costs of investing in the contexts of ERISA is a harbinger of similar arguments in the private trust area.

We conclude with a recommendation that a passive investment strategy become the default standard for corporate and professions trustess under modern iterations of the prudent investor rule.

July 10, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, July 9, 2019

Book on Estate Planning and Asset Protection in Florida

EstatePlanning&Asset-Protec-FL%203D-coverBarry A. Nelson recently published a Book entitled, Estate Planning and Asset Protection in Florida (1st ed., 2019). Provided below is a summary of the book.

Estate Planning and Asset Protection in Florida is designed to help clients and their lawyers protect clients’ assets before litigation happens.

While the necessity of estate planning is understood by most clients, many fail to grasp the importance of protecting their assets as well. Barry A. Nelson, an industry-respected, board-certified attorney with decades of experience counselling high-net-worth clients reveals the serious implications of ignoring the potential liabilities that can threaten a client's assets.

Barry Nelson was among the first to advocate for asset protection. He perceived how estate planning anticipates only the very end of a spectrum of dangers that can adversely affect a client’s estate long before the will is read. The state of Florida, long considered a debtor’s haven, has fraudulent conveyance laws that prevent transfer of assets after litigation happens. Once an accident occurs or exposure to litigation is apparent, asset protection is significantly limited.

This work, years in the making, is like no other work on the market in combining estate planning and asset protection as a strategy. It describes how to integrate estate planning and asset protection for Florida residents to minimize Federal estate taxes and maximize protection of assets and explains what options remain even in the event of a claim such as divorce, claims for alimony, co-signings, or any number of lawsuits. While no one plan fits all, it expertly teaches clients and lawyers how to recognize their best options in a complex web of legal and tax relationships so the most informed decisions can be taken. Comprehensive, yet easy-to -use, it

    • explains all the types of assets and asset protection techniques available, among them: (i) homestead for asset protection, property tax, and limits on dispositions during life and upon death, (ii) annuities; (iii) life insurance, (iv) retirement plan accounts and 529 accounts, (v) spousal transfers including inter vivos QTIP trusts and Spousal Limited Access Trusts ("SLATs"), (vi) domestic and foreign asset protection trusts, (vii) third party created trusts, (viii) use of partnerships and LLCs, and (ix) wage owner accounts.
    • This book also outlines the requirements to benefit from these techniques and identifies from chapter to chapter the greatest traps for clients and their professional advisors, that could, for example, lead to a loss of homestead status, or permit creditors to gain access to earnings, life insurance proceeds, annuities, proceeds from inherited IRAs, pensions, profit sharing plans, etc.;
    • it offers over 250 pages of appendices containing supporting, illustrative sample documents, exhibits, key selections from Florida statutes, the Florida Constitution, white papers, memoranda and affidavits;
    • it discusses over 500 cases;
    • in addressing the use of limited liability partnerships and LLCs it explains why creating trusts and LLCs in a state other than Florida (such as but not limited to Nevada, South Dakota, Delaware and Alaska) may provide greater asset protection than Florida;
    • it considers a range of situations or scenarios and the challenges faced by: those who, for example, become instantly wealthy such as lottery winners, or professional athletes, celebrities or those who receive significant bonuses; it also, addresses the challenges of same-sex partners, the elderly who are vulnerable to financial exploitation, or children for whom a parent has had multiple spouses.

For those undergoing divorce, the book summarizes the laws regarding division of marital assets upon dissolution of the marriage and

    • discusses the ability of a spouse holding an alimony judgment to access third-party-created trusts;
    • it considers the protections of creating trusts in another state or country, and
    • provides the essential information clients need to minimize estate, gift and GST taxes, and
    • it familiarizes clients and advisors with the consequences of recent legislation, such as the Tax Cuts and Jobs Act (the "2017 Tax Act") which became effective January 1, 2018, and which significantly increased the Federal estate, gift, and generation skipping transfer ("GST") tax exemptions.

and much, much more.

July 9, 2019 in Books, Books - For Practitioners, Estate Administration, Estate Planning - Generally | Permalink | Comments (1)

Gloria Vanderbilt's Son Anderson Cooper to Inherit Less than $1.5M, Report Says

CooperGloria Vanderbilt's expected fortune at the time of her passing was estimated to be around $200 million, but according to probate documents, her estate is much smaller. Her eldest son, Leopold “Stan” Stokowski, will inherit his mother's Manhattan co-op, and her son Anderson Cooper gets "the rest," which consists of less than $1.5 million.

The reports have indicated that lavish spending and sizable charitable donations largely diminished her family fortune. Even so, it is more than the CNN anchor had expected to inherit, as he believed that he was not going to receive anything from his mother. "Who has inherited a lot of money that has gone on to do things in their own life?" Cooper asked radio host Howard Stern in 2014. "From the time I was growing up, if I felt that there was some pot of gold waiting for me, I don't know that I would've been so motivated."

See Katherine Lam, Gloria Vanderbilt's Son Anderson Cooper to Inherit Less than $1.5M, Report Says , Fox Business, July 8, 2019.

July 9, 2019 in Current Events, Estate Administration, Estate Planning - Generally, Television, Wills | Permalink | Comments (0)

Monday, July 8, 2019

California Probate Administration is no Time for Napping

CourtroomCalifornia's probate process lasts for at least six months and can run much longer depending on the size of the estate and the particular nature of assets. The personal representative (executor) has the responsibility to resolve creditor claims, get the assets to the appropriate beneficiaries, and execute the estate efficiently. In a recently decided appellate case, the court affirmed the lower court's opinion that two decades is far too long of a "nap" for a personal representative.

In the Estate of Sapp, Roscoe Sapp, Sr. died in 1994 and left behind seven living children and an estate worth millions. The will, entered into probate in 1995, stated that his real property should go to his children to  “to share + share alike.” After a daughter was removed as personal representative in 1999, Edith Rogers, a granddaughter, and two other grandchildren were appointed as representatives. But by 2001, only Edith and another representative remained, and they petitioned the court for instructions because they disagreed on how they should proceed because some of the remaining heirs were disabled and unable to care for themselves. The court sided with the other co-representative and instructed the estate to sell all the real property assets and distribute the proceeds. Two years later, the co-representative died, leaving Edith as sole personal representative of her grandfather's estate.

No surprise, but Edith did not follow the court's instructions. Though four real properties were apparently sold in 2004, the remaining nine parcels still were unsold in 2017. Another grandchild, Armuress Sapp, filed a petition to be named successor administrator because Edith was ineffective by removing the real estate from active listings, not paying heirs and creditors, and even allegedly offered to pay approximately ten family members $10,000 each to “just sign off and walk away.”

In April 2017, the probate court in Riverside County granted the petitions to remove Edith as administrator pursuant to California Probate Code section 8502 and appointed Armuress as successor administrator.

See Christopher Miles Kolkey, California Probate Administration is no Time for Napping, Trust on Trial, July 2, 2019.

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

July 8, 2019 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)

Friday, July 5, 2019

How to Talk to Your Financial Advisers About a Chronic Illness

MeetingThere are plenty of misconceptions about chronic illnesses, and as a society Americans do not understand how to deal with others that are facing them. If you or are loved one is facing a chronic illness, financial advisors should be made aware so that appropriate planning can be performed in a safe and comfortable place.

Many people believe that chronic illnesses are only an ailment of the elderly, but the truth is that 60% of those living with one are between the ages of 18 and 64. If you are living with a chronic condition, before you even meet initially with your financial advisor, you should make them aware if they should supply any necessary accommodations. As empathetic as a your advisor may be, they may not understand the physical assistance your disease or condition may require you to need. If there are cognitive impairments or a neurologist condition, ensure that your financial advisor understand what your needs are and where mental ability stands.

Clients should give advisers express permission to ask any questions so that they can understand all your needs and provide as comfortable a meeting as possible.

See Martin Shenkman, How to Talk to Your Financial Advisers About a Chronic Illness, Forbes, July 5, 2019.

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

July 5, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Thursday, July 4, 2019

Article on Parens Patriae and the Disinherited Child

WilltestamentMichael J. Higdon recently published an Article entitled, Parens Patriae and the Disinherited Child, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Most countries have safeguards in place to protect children from disinheritance. The United States is not one of them. Since its founding, America has clung tightly to the ideal of testamentary freedom, refusing to erect any barriers to a testator’s ability to disinherit his or her children — regardless of the child’s age or financial needs. Over the years, scholars have questioned this approach to disinheritance, which has become more common given the evolving American family, specifically the increased incidences of divorce, remarriage, and cohabitation. Critics of the American approach have offered up solutions largely based on the two models currently employed by other countries: 1) the forced heirship approach, in which all children are entitled to a set percentage of their parent’s estate; and 2) family maintenance statutes, which provide judges with the discretionary authority to ignore a testator’s wishes and instead award some portion of the estate to the testator’s surviving family members. This Article takes a different approach and looks at the issue of disinheritance through a new lens: the doctrine of parens patriae. Just as this doctrine limits the decision-making autonomy of living parents vis-à-vis their children, this Article argues that it should likewise limit the dead hand control of deceased parents. Focusing on minor children, adult children who remain dependent as a result of disability, and adult children who are survivors of parental abuse, it is the contention of this Article that testamentary freedom must sometimes yield to the state’s inherent parens patriae authority to protect children from harm. Specifically, this Article proposes that courts should refuse to enforce testamentary schemes that disinherit those children if that disinheritance would constitute abuse or neglect. Such an approach is not only mandated by the doctrine of parens patriae but, in contrast to the approaches other countries have adopted, is more deferential to testamentary freedom. The limitations it does impose represent a relatively modest curtailment of the rights testators currently possess and, at the same time, are consistent with existing exceptions to testamentary freedom, most notably those in place to protect spouses and creditors as well as those that prohibit the enforcement of testamentary provisions that violate public policy.

July 4, 2019 in Articles, Current Events, Estate Administration, Estate Planning - Generally, Wills | Permalink | Comments (0)

Wednesday, July 3, 2019

These High-Profile Figures will not be Leaving a Lot of Their Fortunes to Their Children

BillgatesMany celebrities and members of the super-wealthy, especially those that are self-made, have been extremely public about their decisions to leave small inheritances to their children. Well, small relative to their net worth, at least. Berkshire Hathaway CEO Warren Buffett as well as Microsoft co-founder Bill Gates and his wife, Melinda Gates, founded the Giving Pledge, a campaign to get the ultra-wealthy to pledge half their fortunes to charitable causes. eBay founder, Pierre Omidyar signed onto the pledge in 2010, along with his wife. Another notable member of the Giving Pledge is New York City Mayor Michael Bloomberg.

After her divorce from Amazon founder Jeff Bezos is finalized later this month, Mackenzie Bezos states that she will sign on to the campaign to give away half of what she is awarded. Warren Buffet, who has an estimated worth of $87.5 billion, says that he will be leaving his children $2 billion each. The rest, or more than 99% of his wealth, is going to philanthropic causes. His reasoning for his children getting such a small portion of his fortune? He wants them to receive “enough money so that they would feel they could do anything, but not so much that they could do nothing.''

Bill Gates wills be doing the same thing for his children and for the same reason: as to not stunt their ambition and drive. The singer, Sting, as well as celebrity chef Gordon Ramsay have similar plans with their estates so they do not "spoil" their children.

See Kathleen Joyce, These High-Profile Figures will not be Leaving a Lot of Their Fortunes to Their Children, Fox Business, June 29, 2019.

July 3, 2019 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Music, Television | Permalink | Comments (1)