Wills, Trusts & Estates Prof Blog

Article: Creditors’ Rights in Property Subject to a Beneficiary’s Right of Withdrawal

S. Alan Medlin (David W. Robinson Professor of Law at the University of South Carolina School of Law) and F. Ladson Boyle (Charles E. Simons, Jr. Distinguished Professor Emeritus of Federal Law at the University of South Carolina School of Law) recently published an article entitled, Creditor’s Rights in Property Subject to a Beneficiary’s Right of Withdrawal, ABA Real Property, Trust and Estate Law Journal, 2022. Provided below is an abstract of the Article:

Estate plans often give trust beneficiaries powers of withdrawal for both tax and nontax reasons. For tax reasons, these powers of withdrawal are typically limited, such as a “five or five power” or a so-called Crummey power commonly pegged to the annual gift tax exclusion amount. A central issue with limited powers of with-drawal is the right of a beneficiary’s creditor to reach trust property subject to the beneficiary’s power to withdraw. Recent uniform statutes, such as the Uniform Trust Code and the Uniform Power of Appointment Act, as well as the Restatement (Third) of Trusts, provide guidance. This Article discusses the typical reasons for creating powers of withdrawal and the historical and recent treatment of the rights of creditors of trust beneficiaries with powers of withdrawal, along with some planning considerations.

Article: Texas Estate Planning Judicial Update: Summer 2022 Edition

Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law at Texas Tech University School of Law) recently published an article entitled, Texas Estate Planning Judicial Update: Summer 2022 Edition. Provided below is an abstract of the Article:

This article discusses recent judicial developments (first half of 2022) relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters. The discussion of each case concludes with a moral, i.e., the important lesson to be learned from the case. By recognizing situations that have led to time consuming and costly litigation in the past, estate planners can reduce the likelihood of the same situations arising with their clients.

Self-described 'lottery lawyer' is found guilty in scheme to defraud his lottery-winner clients

Former Riven Radler partner, Jason Kurland of New York, was found guilty of wire fraud, wire fraud conspiracy, honest services wire fraud, unlawful monetary transactions, and a related conspiracy charge due to his mismanagement of his clients lottery winnings. 

A self-described “lottery lawyer,” Kurland helped lottery winners manage their newfound wealth. However, prosecutors alleged that he convinced his clients to invest in business that he secretly owned, and then received kickbacks based on these investments.

Kurland claims that he was set up as a fall guy and was not in conspiracy with the businesses. At the time of the initial indictment, more than $80 million of his clients money had been stolen or lost. 

For more information:

See Stephanie K. Baer “Self-described ‘lottery lawyer’ is found guilty in scheme to defraud his lottery-winner clients” ABA Journal, July 27, 2022.

Son writes scathing obituary for dad: ‘Evil does eventually die’

While most obituaries offer a heartfelt goodbye to a loved one, a Florida newspaper recently published a scathing obituary for Lawrence H. Pfaff Sr. of Belmont, New York. Pfaff died on June 27, and according to his obituary, 81 years as “a life longer than he deserved.”

His son, Lawrence Pfaff Jr. described his father as “a ladies man,” an “abusive alcoholic,” and that “his love was abundant when it came to himself, but for his children it was limited.” 

Pfaff Jr. began writing the obituary a year before his father passed. He did so as a process of healing from his childhood trauma.

For more information:

See Marlene Lenthang “Son writes scathing obituary for dad: ‘Evil does eventually die’,” Yahoo! News, July 7, 2022.

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

Betty White’s Longtime L.A. Home Lists for $10.755 Million, as Her Carmel House Closes for Well Over Ask

Four months after the death of Betty White, her estate sold one of her California homes for $10.775 million, well over its $7.95 million asking price. The three story home in Carmel has ocean view and sits on a 0.3 acre lot. Ms. White and her husband, the late Allen Ludden, purchased the land in 1978 for $170,000 according to property records. They finished building the home in 1981.

The estate is also listing her primary residence, a five-bedroom home in the Brentwood area of Lost Angeles. 

For more information, see Sarah Painter, “Betty White’s Longtime L.A. Home Lists for $10.755 Million, as Her Carmel House Closes for Well Over Ask”, Wall Street Journal, April 26, 2022.

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

Cher's $1 Million Royalty War With Sonny Bono’s Widow Tested in Court

Earlier this week, Cher’s lawsuit against Mary Bono for unpaid royalties had its first major court hearing. Cher claims that the Bono Collection Trust is attempting to terminate her 50% share of the composition and recording royalties she was awarding in her 1978 divorce from Sonny Bono. 

According to Bono’s widow, that 50% stake expired with the rights flowing back to Sonny’s heirs. “Sonny could grant Cher his then-current rights, including a 50% royalty interest in his copyrights. Sonny could not however, have signed away his heirs’ future rights of termination.” Bono contends that the federal Copyright Act allows her to terminate the right to royalties that Sonny signed over to Cher during their divorce settlement.

U.S. District Judge John A. Kronstadt gave both sides two weeks to file further arguments ahead of his ruling.

For more information:

See Nancy Dillon, "Cher's $1 Million Royalty War With Sonny Bono's Widow Tested in Court", Rolling Stone, April 25, 2022.

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

Death by Deduction: Section 2058 and the Decline of State Death Taxes

Jeffrey A. Cooper recently published an article entitled, Death by Deduction: Section 2058 and the Decline of State Death Taxes, Wills, Trusts, & Estates Law ejournal (2022). Provided below is the abstract to the Article:

This article illustrates how, and seeks to explain why, the deduction for state estate taxes (Internal Revenue Code Section 2058) seems to have had no meaningful effect on state tax policy.

Since the deduction for state estate taxes reduces the amount of federal estate taxes paid, the net effect is to shift to the federal government some of the cost of these state death taxes. Prevailing theories of tax policy suggest that state governments will structure their tax systems to maximize this type of available deduction. But theory has not borne out in practice. To the contrary, most states have responded to enactment of Section 2058 not by restructuring their existing state estate taxes to maximize this federal deduction but rather by entirely abandoning state estate taxes. While a remaining group continue to impose those taxes, they have failed to structure those taxes in a manner that would optimize the deduction. In short, the 2058 deduction seems to have had extremely little, or perhaps entirely no, effect on state estate tax policy.

This article explores state responses to Section 2058, yielding important lessons about the operation of state legislatures, the political climate surrounding progressive taxation, and the interplay of federal and state taxes.

Article: Uncertainty About the Condonation of Formally Non-Compliant Wills, and the Rectification of Cross-Signed Mirror Wills: Is an Act-Based Model the Solution?

James Faber recently published an article entitled, Uncertainty About the Condonation of Formally Non-Compliant Wills, and the Rectification of Cross-Signed Mirror Wills: Is an Act-Based Model the Solution?, Wills, Trusts, & Estates Law ejournal (2022). Provided below is the abstract to the Article:

A recent contribution proposed a processual act-based approach to conceptualising wills in South African law. This approach regards a will as the product of a will-making process in which various parties perform specific acts with specific associated forms of intention in order to establish a will. The act-based model also paves the way for the introduction of an intent doctrine in South African law. This article tests the functioning of the proposed act-based model by applying it to two scenarios: the condonation of formally non-compliant wills in terms of section 2(3) of the Wills Act and the rectification of cross-signed mirror wills in terms of the common law. Both scenarios continue to be plagued by uncertainty as a direct consequence of the lack of a proper definition, explanation and contextualisation of testator's intention in South African law. Regarding condonation, it is found that, because the courts are often left guessing or speculating as to testator's intention, they inevitably overemphasise other aspects such as the form of the document to establish intention for the purposes of condonation in terms of section 2(3). An act-based model could ensure that the decision to condone or not to condone relies solely on whether the document embodies the act of testation. If the act of testation is found to be present (no matter in which shape or form, or by whom it was drafted), the document embodying such an act should be condoned. In terms of rectification, in turn, the act-based model highlights the important distinction between content and formality – the act of testation as opposed to compliance with the statutory formality requirements through the execution of a will. It appears that rectification is appropriate only where an error has caused a discrepancy between the testator's true intention and the intention as expressed in the act of testation contained in the will. Rectification seems less appropriate when dealing with cross-signed wills, which are the result of a flawed execution process. Instead, condonation is much better suited for correcting the formal non-compliance of cross-signed wills.

Britney Spears asks judge to deny mom's request for over $660K in legal fees

Britney Spears has asked a judge to deny her mother's request for the singer to pay over $660,000 in legal fees.

Lynne Spears' filed a petition in November to request legal fees, in which she claimed that she hired a team "to assist Britney to break the restriction imposed by the conservatorship." 

Britney Spears' attorney Matthew Rosengart filed an objection to the petition for payment on April 5, arguing that "Lynne is a third party to the conservatorship and that there's no authority that says a third party can obtain funds from a conservatee's estate to pay for attorneys hired by that third party.

Rosengart also mentioned that Britney Spears has paid over $1 million over the last decade for Lynne to live in a "large, expensive house" and also argued that Britney pays for Lynne's "utilities, telephone services, insurance, property taxes, landscaping, pool work, pest control, repairs, and maintenance, totaling $1.7 million. . ." 

A ruling has not yet been made. 

See Melissa Roberto, Britney Spears asks judge to deny mom's request for over $660K in legal fees, Fox Business, April 8, 2022. 

Florida Appeals Court Says No Fees and Costs Reimbursement To Personal Representative From Sale Of Homestead Property

In Lanford v. Phemister, the Florida Fifth District Court of Appeals "reversed a probate court's order permitting the personal representative fees and costs to be paid from proceeds of the sale of protected homestead property. . ." 

When Mary Lee Dillard ("Decedent") died in 2016, she left some personal property to her sister, but left the majority of her assets, including homestead real property to a testamentary trust. Decedent's sister, Billie Jo Schell was the primary beneficiary of the testamentary trust while the Kirk Family Charitable Trust was the contingent remainder beneficiary. 

Robin Phemister was appointed the personal representative of Decedent's estate as well as the trustee of the testamentary trust created in Decedent's will. 

The Florida probate court determined that "Decedent's home constituted exempt homestead property, and that constitutional homestead protections inured to Phemister, as testamentary trustee, for Schell's benefit." The Florida Probate court then authorized Phemister, as trustee, to sell the homestead property, and the property was eventually sold. 

Schell died in 2018 and the residuary of the Decedent's estate passed to the Kirk Trust. J. Scott Lanford was the trustee of the Kirk Trust. 

Phemister petitioned the court to disburse the proceeds from the homestead property's sale to pay for her fees. Lanford objected, arguing that the homestead sale proceeds could not be used to pay Phemister. The Florida probate court eventually awarded reimbursement of Phemister's costs and attorney's fees and Lanford appealed. 

The Florida Fifth District Court of Appeals reversed the decision following the well-established law that constitutionally protected homestead property is not subject to the expenses of estate administration. 

See Florida Appeals Court Says No Fees and Costs Reimbursement To Personal Representative From Sale Of Homestead Property, Probate Stars, April 11, 2022.