Wills, Trusts & Estates Prof Blog

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

Saturday, June 27, 2020

XXXTentacion's Mom Sued for $11M by Half Bro, Claims She Stole from Trust

UnknownIt has been two years since XXXTentacion's (XXX) passing, but the drama storm continues to brew, as his half-brother is suing XXX's mother, claiming she stole from his Trust. Jodi Kavney, the mother of XXX's half-brother, Corey Pack, claims that Cleopatra Bernard, created a plan to siphon off millions of dollars from her own son's trust—money that the rapper set aside for Corey. 

Jodi, who's suing on behalf of Corey, says in docs, XXX left behind assets in excess of $50 million ... including a trust that lists Corey as 1 of 3 beneficiaries. In the lawsuit, Jodi claims Cleopatra cut a deal with XXX's baby mama which helped her cut Corey out of his portion of the estate. Jodi's now seeking to recover assets she claims were "improperly and surreptitiously transferred" by Cleopatra to herself.

Jodi's suing for $11 million in damages and may try to triple that amount ... if she can prove this was intentionally done. She also claims Corey's entitled to ownership rights to XXX's record label, Bad Vibe Entities.

In a recent update in the case, Bernard's attorney, Michael Simon, told TMZ that the lawsuit that was filed was completely without merit as a court has already determined that Corey Pack is entitled to nothing from XXX's estate or trust. 

Cleopatra has not only paid Corey’s living expenses and purchased him a car, but she has gifted to him and his mother, Jodi Kavney, a mortgage free home and paid the current year’s real estate taxes.

See XXXTentacion's Mom Sued for $11M by Half Bro, Claims She Stole from Trust, TMZ, June 19, 2020. 

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

June 27, 2020 in Estate Administration, Estate Planning - Generally, Music, Trusts | Permalink | Comments (0)

Monday, June 8, 2020

Nevada Supreme Court: No Fiduciary Exception to The Attorney-Client Privilege

AdobeStock_225164631-REDSeveral states have adopted a fiduciary exception to the attorney-client privilege, which prevents a fiduciary such as a trustee from asserting attorney-client privilege against beneficiaries of a trust or estate on matters of administration. In the May 2020 case of Canarelli v. Eighth Judicial District Court, the Nevada Supreme Court held that no fiduciary exception to the attorney-client privilege exists under Nevada law. 

Scott Canarelli was the beneficiary of an irrevocable trust. The Trust contained minority interests in several business entities owned by Scott's parents. Scott assured that the trustees were unlawfully withholding trust distributions for Scott's health, education, maintenance, and support. Scott's parents resigned as trustees and Lubbers became the successor family trustee. A week after Scott's parents resigned, Lubbers entered into a purchase agreement exceeding $25 million on behalf of the Trust to sell off the Trust's ownership interest in their business entities. 

Scott filed a petition demanding that Lubbers proves all information relating to the purchase agreement. Lubbers hired attorneys and responded to the petition in 2013. Lubbers resigned as trustee in 2017 and died six months later. 

Regarding the documents in dispute, Scott's parents and Lubbers petitioned the Nevada Supreme Court for a writ of prohibition preventing the district court from compelling production. The former trustees also petitioned for a writ of mandamus to find the documents undiscoverable and order for their return or destruction. 

In Nevada, a client's notes and communications are covered by attorney-client privilege and the Nevada Supreme Court held that the exception did not apply here and ultimately granted the petition and directed the issuance of a writ of prohibition prohibiting the district court from compelling production. 

See Nevada Supreme Court: No Fiduciary Exception to The Attorney-Client Privilege, Probate Stars, June 2, 2020. 

June 8, 2020 in Estate Administration, Estate Planning - Generally, New Cases | Permalink | Comments (0)

Tuesday, June 2, 2020

Should a Parent of Two Children Split Inheritance Equally?

31Ethicist-superJumboImagine an elderly parent who has a fair amount of wealth and and two children. One is wealthy with luxury properties and married with no children. This child lives far away and only visits occasionally. The other child lives close to the parent, has a modest salary, has children as well as several grandchildren and regularly visits and helps the parent. The parent decides that it is fair to leave her children an equal share of the assets. Is this ethical?

In Aristotle's Nicomachean ethics, he points out that when people who are equal are granted unequal shares – or people who are equal are granted unequal shares – quarrels and complaints arise. However, the challenge is deciding what makes two people equal. In this case, the children are unequal in two different ways: (1) the contribution they have made to their elderly parents and (2) in their financial situation. 

There is something unattractive about providing a financial benefit as a reward for a display of care. This type of benefit is risky because it can encourage ulterior motives for providing help for loved ones. However, this problem does not arise when more money is left to a child due to their financial situation. Other children may be disappointed, but there is less reason for complaint.

Many people move towards equal shares because it shows that a parent loves and cares for their children equally and this requires not comparative assessment. However, parenting often requires you to pay equal attention to your children, but the need to respond specifically to their tailored needs. "Equal love would be evidenced by giving our tennis-playing son a new racket and our golf-playing daughter a new golf club – not by giving them both a tennis racket."

With these considerations in mind, it appears that leaving more to one child with the greater need would be permissible. The main point being, if the estate is to be divided to favor one child over the other, the parent should make it clear why doing so was necessary and consistent with each having an equal claim to the parent's love. 

See Kwame A. Appiah, Should a Parent of Two Children Split Inheritance Equally?, N.Y. Times, May 26, 2020. 

Special thanks to Matthew Bogin, (Esq., Bogin Law) for bringing this article to my attention. 

June 2, 2020 in Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Monday, May 18, 2020

The Supreme Court of Washington: Surviving Spouse Gave Up Right to Intestate Succession in Separation Contract

Waiver-e1560119697129The Supreme Court of Washington held in In Re Estate of Petelle, that the right of a surviving spouse to intestate succession can be waived in a separation contract, even if not expressly stated. The Court held that the language, "all marital and property rights" includes the right to inherit as an intestate beneficiary. 

Michael and Michelle had been married for six years before Michael filed a petition to dissolve the marriage. The parties executed a separation contract that dissolved assets and liabilities. In the separation contract the parties agreed to make a complete and final settlement of all their marital and property rights on the following terms and conditions, which stated:

“The contract shall be final and binding upon the execution of both parties, whether or not a legal separation or decree of dissolution is obtained[,]” and, by its terms, the contract remained valid and enforceable against the estate of either party if either party died after the execution of the contract. Though the contract contains a “Full Satisfaction of All Claims” section, the right to intestate succession is not mentioned."

Michelle claimed that her and the decedent were considering reconciliation, however, the decedent died intestate before divorce or reconciliation could occur. Following the decedent's death, Michelle opened decedent's probate without disclosing the separation contract or giving notice to decedent's heirs. Decedent's mother contested the grant of powers of Michelle; she also petitioned the trial court to terminate Michelle's right to intestate succession, but the trial court denied the petition. However, the Court of Appeals reversed, finding that the petitioner waived her right to intestate succession under the language in the separation contract.

The main takeaway is that, in Washington, statutory intestate rights can be waived by either express waiver or implied waiver. Further, under Washington law, intestate rights do not have to be specifically referenced in a separation contract. 

See The Supreme Court of Washington: Surviving Spouse Gave Up Right to Intestate Succession in Separation Contract, Probate Stars, May 18, 2020.

May 18, 2020 in Death Event Planning, Estate Administration, Estate Planning - Generally, Intestate Succession, New Cases | Permalink | Comments (0)

CLE on Estate Planning Strategies in an Era of Low Interest Rates and Volatile Markets

CLEThe American Law Institute is holding a webcast entitled, Estate Planning Strategies in an Era of Low Interest Rates and Volatile Markets, on Wednesday, June 3, 2020 at 1:00 - 2:00 p.m. Eastern. Provided below is a description of the event.

Why You Should Attend

While the pandemic has brought our economy to its knees, the resulting bear market of depressed asset valuations and record-low interest rates provides some incredible estate planning opportunities designed to take advantage of this kind of environment. This one hour webcast, taught by two highly experienced practitioners, will explore specific strategies available during a market decline that may help to reduce potential estate taxes and fulfill your clients’ estate planning goals, including the use of trusts, notes, gifts, and charitable giving.

What You Will Learn

Topics include:

• Grantor retained annuity trusts (GRATs), including GRATs as gifts and buying back assets from depressed or appreciated GRATs

• Charitable lead annuity trusts

• 2020 valuations

• Low interest notes and sales

• Refinancing notes

• Charitable giving

• Gifts of depressed assets

• Disclaimers as a hedge

• Why high volatility means higher discounts

• Spreading out transfers of gifts, GRATs, and sales

All registrants will receive a set of downloadable course materials to accompany the program.

Who Should Attend

All estate planners and financial advisors will benefit from listening to this webcast on estate planning strategies with low interest rates and unstable financial markets.

May 18, 2020 in Conferences & CLE, Current Affairs, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Friday, May 15, 2020

To File or Not to File? A Gift Tax Return Doesn't Always Have to Be Filed

Gift-Tax-bigstockDue to the generous $11.58 million lifetime gift tax exemption for 2020, fewer people are subject to federal gift taxes and many are wondering if they still need to file a gift tax return. Well, if your wealth is within the exemption amount, the answer is no. However, there are a few exceptions where it is necessary and even beneficial to file a "United States Gift (and Generation-Skipping Transfer) Tax Return." (Form 709). 

It is assumed that all transfers of property by gift are taxable, but there are exceptions. Examples of these nontaxable transfers that do not need to be reputed are:

  • Gifts of present interests within the annual exclusion amount
    •    Amount currently at $15,000 per donee
  • Direct payments of qualifying medical or educational expenses on behalf of an individual
  • Deductible charitable gifts
  • Gift to one's U.S.-citizen spouse, either outright or to a trust that meets certain requirements
  • Gifts to one's noncitizen spouse within a special annual exclusion amount

If any of your gifts fall under these exceptions there is no need to file a gift tax return. The gifts will most likely be considered taxable in the instances that they do not. If you are making gifts throughout the year, always be cognizant of whether you will be required to file Form 709. Gifting future interests, spousal gifts, gift splitting, or 529 plans may cause you to need to file Form 709. 

Further, even if you are not required to file Form 709, it may be beneficial to file voluntarily. In particular, if you make any annual exclusion gifts of difficult-to-value assets, for example, interests in a closely held business, you should file Form 709. 

To conclude, making gifts is a great way to benefit both your estate and your loved ones. It is also very important to contract your estate planning advisor to help you in determining whether you need to file a gift tax return.

See To File or Not to File? A Gift Tax Return Doesn't Always Have to Be FiledInsight on Estate Planning, May 12, 2020. 

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

May 15, 2020 in Estate Administration, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Thursday, May 14, 2020

Article on The Rise of Business Trusts in Sustainable Neo-Innovative Economies

TechworldLee-ford Tritt & Ryan Scott Teschner recently published an Article entitled, The Rise of Business Trusts in Sustainable Neo-Innovative Economies, Wills, Trusts, & Estates Law eJournal (2019). Provided below is the abstract to the Article.

Business trusts have been commonly used in the United States as an organizational form for over 100 years. Historically, entrepreneurs used business trusts to escape regulatory and tax requirements imposed on corporations. Today, in the United States, business trusts are narrowly used in specialized niches, such as structured finance transactions and the setting up of mutual funds, while corporations have ascended as the dominant organizational form for operating a business. By contrast, business trusts have enjoyed a resurgence in neo-innovative economies such as Singapore. An understanding of the growing utilization of business trusts as an organizational form abroad could prove enlightening for future American economic ventures, especially foreign investment. For instance, why are business trusts gaining popularity in Singapore and other Asian markets? And, why have business trusts generally been overlooked in the United States outside of mutual funds and employee pension funds? This Article seeks to address these questions by discussing and comparing business trusts in the United States with those being used in Singapore. Beyond providing mere descriptive accounts of business trusts in these two countries, this Article will consider the transportability of key concepts of Singapore business trusts to American business trust law and usage. In addition, this Article will be mindful that American institutional and cultural business contexts (for example, historical use and the emerging sustainability movement), as well as American trust jurisprudence, may limit the applicability of these key concepts in the United States.

May 14, 2020 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Texas Court Annuls Marriage of Ward Under Guardianship

MArriageIn November 2018 and January 2019, respectively, a man (the ward) was found to lack capacity to care for himself, contract, or marry. Without the consent of the ward's guardians, he married his girlfriend (Martinez) in March of 2019. Following the marriage, the guardians petitioned to annul the marriage and a Texas trial court granted the annulment. Martinez then appealed the decision to the Fourth Court of Appeals in Texas.

Martinez argued that the trial court could not annul her marriage without an evidentiary hearing. Responding to the argument, the Fourth Court of Appeals, citing the Texas Family Code, stated that the trial court has discretion in granting an annulment and is not required to hold an evidentiary hearing before doing so. 

Under Texas law, guardians have the burden of showing that the ward lacked capacity to marry before vows have been exchanged. Martinez asserted that vows were exchanged in March 2019. However, even if true, the ward was found to lack the capacity to marry in November 2018 and January 2019, in which one of the orders expressly stated that the ward, "shall not retain the right to marry." Martinez failed to provide any evidence that the ward's right to marry had been reinstated.

In order to defeat the appeal of the annulment, the ward's guardians also had to show that the ward had not voluntarily cohabited with Martinez following the wedding ceremony. Martinez failed to show that the ward voluntarily cohabited with Martinez, which would have shown that he was able to recognize the marriage relationship. The Fourth Court of Appeals quickly affirmed the Texas trial court's decision to annul the marriage.

In conclusion, if a ward has their right to marry revoked and lacks the capacity required to recognize a marriage, the Texas courts will have a very simple decision to make! Annulment!

See Texas Court Annuls Marriage of Ward Under Guardianship, Probate Stars, May 1, 2020. 

May 14, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Guardianship, New Cases | Permalink | Comments (0)

Wednesday, May 13, 2020

California Appeals Court: Deceased Husband’s Sperm has no Value if it Cannot Actually be Used

IVFAfter her husband fell into an irreversible coma, a woman had his sperm extracted and stored at a tissue bank in hopes that she could one day conceive a child biologically related to him. 10 years after he died, the woman requested the sperm. The tissue bank could not find it, and the woman sued them, asserting contract and tort claims under California law. The trial court found in Robertson v. Saadat that the woman suffered no injury because she had no right to use the sperm to conceive a child. The woman appealed.

The California Court of Appeal, Second District, affirmed the trial court’s decision. Sperm is not governed by the rules that apply to gifts or personal property, and as gametic material, it must be specifically mentioned in testamentary documents. “In other words, the fact that plaintiff as Aaron’s spouse may be his legal next of kin has no bearing on whether she may use his sperm for posthumous conception.” Furthermore, the husband had no knowledge of the sperm extraction before his death, and therefore had no “‘decisionmaking authority as to the use of [the gametes] for reproduction.'”

The court also rejected the woman's argument that the sperm fell under the Uniform Anatomical Gift Act (UAGA) as the sperm would be "transplanted" into her. The legislative history of the UAGA indicates that “transplantation” under the UAGA refers to taking organs and tissue from a donor and placing them in recipients whose equivalent organs or tissue are damaged, not to conceive a child.

Because the woman could not prove that she was entitled to use the deceased husband's sperm as his surviving spouse, she had to show that it had been his intent to allow her to conceive with the extracted sperm. There must be an express indication in writing of an intent to allow the use of decedent’s genetic material for posthumous conception. The husband did not leave such writing, so there was no express intent.

With no intent nor entitlement to use the sperm, there was no value to the sperm, and the woman could not claim emotional distress caused by the inability to conceive the husband's child.

See California Appeals Court: Deceased Husband’s Sperm has no Value if it Cannot Actually be Used, Probate Stars, May 11, 2020.

May 13, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Science, Technology, Wills | Permalink | Comments (0)

Tuesday, May 12, 2020

Does Little Richard’s Son Inherit his $40 Million Career or Will God Get Everything?

LittlerichardThe legendary musician Little Richard helped revolutionize music, bringing forth the rock-and-roll movement. It is rumored that he earned $40 million over his decades long career, but the question is how much of that is left? And who will it pass on to?

Richard's 49-year-old son Danny may be getting a portion of it, whether by default or design, as they remained on good terms during the musician's life. But the assets that could be inherited are questionable. Unfortunately, he sold the publishing rights to his songs in the mid-1950s and the intellectual property eventually ended up at Sony. Unlike for children of other older musicians, there is no vast copyright library to harvest income for future generations, nor a secret archive of unreleased recordings.

Hologram projections of his father may not be Danny's forte, as it is known that he is an individual that values his privacy.Richard's surviving siblings are too old to attempt to push the hologram feature, and the traditional churches he associated with are most likely not interested, either. 

See Scott Martin, Does Little Richard’s Son Inherit his $40 Million Career or Will God Get Everything?, Wealth Advisor, May 11, 2020.

May 12, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Music | Permalink | Comments (0)