Wills, Trusts & Estates Prof Blog

Challenges in Estate Planning with Investment Real Estate

The article provides an in-depth analysis of the key challenges in estate planning for clients with significant real estate investments. First, it highlights the complexities of determining asset value, especially when dealing with varied property types such as residential, commercial, or rental properties. Market fluctuations, local conditions, and valuation techniques all influence the estate's worth, making accurate assessments difficult.

A major challenge addressed is liquidity. Unlike stocks or bonds, real estate isn't easily converted to cash, which complicates paying estate taxes or debts. This is especially important in high-value properties that don't generate sufficient cash flow. The article suggests strategies like taking out life insurance policies or selling certain assets to ensure liquidity.

Another critical issue is succession planning. Real estate assets may face legal disputes or management challenges if not handled properly. The article recommends creating trusts, outlining detailed plans for transferring properties, and considering family dynamics in structuring the estate. Long-term legal and financial planning is essential to avoid complications during the transition, making real estate an intricate aspect of estate planning.

For more information see Mary P. O'Reilly and Andrew L. Baron, "Challenges in Estate Planning with Investment Real Estate" ABA Probate and Property Journal, September 1, 2024.

AI and the Formulation of Critical Data for Trust Mediations

The article discusses how attorneys gather and use information in litigation, emphasizing that the ability to effectively process and apply information distinguishes good attorneys from ineffective ones. While attorneys must analyze facts and legal issues, the balance of information between opposing parties is often unequal. Discovery processes aim to level this imbalance, but time constraints and client needs—especially in trust disputes—can pressure attorneys to settle cases through mediation.

The article then explores the emerging role of artificial intelligence (AI) in assisting attorneys, particularly in trust litigation. AI platforms, including large language models (LLMs) and generative AI, are evolving to help attorneys manage and process information more efficiently. These technologies could soon support mediation, assisting with asset allocation in subtrusts, trust accountings, and other data-heavy tasks. AI's potential to automate complex calculations, verify opposing counsel’s projections, and organize financial records offers significant time and cost savings.

The future of AI in litigation will depend on its growing sophistication and the creative use of technology by attorneys, but its effectiveness in mediations and large-scale information processing is expected to increase dramatically. The question of whether AI can provide wisdom in decision-making remains open for debate.

For more information see John H Sugiyama "AI and the Formulation of Critical Data for Trust Mediations," ABA Probate and Property Journal, September 1, 2024.

Springing Trust Protectors — Now You See 'em, Now You Don’t

The article discusses the growing importance and use of a "trust protector" in estate planning, a role that wasn't widely understood until recently. Trust protectors originated with offshore asset protection trusts, where they provided an extra layer of control over the trust, offering flexibility and security for the settlor, who often hesitated to entrust large amounts of wealth to foreign trustees. This concept has since been adopted in U.S. trusts to allow adjustments to irrevocable trusts without needing court reformations, which can be complex, costly, and time-consuming.

A trust protector is a non-trustee individual with the power to oversee or modify trust provisions to respond to changing circumstances, such as laws, family dynamics, or economic conditions. Their powers may include modifying beneficiaries, relocating the trust, or even altering the trust's terms. However, the extent of a trust protector's powers and responsibilities requires careful drafting.

The article also explores the concept of a "springing protector," a protector appointed only when needed. This approach allows for flexibility without permanently binding the trust to a specific protector. Questions arise around the legal basis, liabilities, compensation, and scope of powers for both permanent and springing protectors, especially in terms of tax implications or potential creditor issues if a protector holds nonfiduciary powers.

Ultimately, the trust protector offers a practical solution to managing unforeseeable changes during the life of a trust, minimizing the need for court involvement and allowing for smoother administration.

For more information see Alexander A. Bove Jr "Springing Protectors — Now You See 'em, Now You Don’t" ABA Probate and Property Journal, September 1, 2024.

Creative life after death − or yes, you can control spinoffs from beyond the grave

The article discusses how the estates of deceased artists, like Michael Crichton, Isaac Hayes, and George Carlin, are involved in legal battles to protect their legacies and control over their intellectual property.

Michael Crichton’s estate is suing Warner Bros. for allegedly rebooting ER through a new medical drama The Pitt, invoking a "frozen rights" contract Crichton had signed, giving him and his estate approval rights over sequels. Such contractual rights can survive death, allowing estates to enforce them.

Copyright protection extends 70 years after an author's death, as shown by the estate of Isaac Hayes suing Donald Trump’s campaign for unauthorized use of his song, and Donna Summer’s estate’s lawsuit against Ye and Ty Dolla Sign for using her music without permission.

Publicity rights, which prevent unauthorized commercial use of someone’s name or likeness, also persist after death in some states. This is seen in George Carlin’s estate suing a podcast for using AI to mimic his likeness and voice. Little Richard's estate involved estate planning to ensure beneficiaries cooperated in managing his posthumous publicity rights, with penalties for interference.

These cases highlight how legal measures like contracts, copyright, and publicity rights help control the use of an artist’s work even after death, especially in the age of AI, where unauthorized reproductions are more common.

For more information see Naomi Cahn and Reid Kress Weisbord "Creative life after death − or yes, you can control spinoffs from beyond the grave" TheConversation.com, September 13, 2024. 

Special thanks to Naomi Cahn (University of Virginia School of Law) for bringing this article to my attention.

Simple request in Long Island woman's will sparked her son's devastating shotgun rampage on siblings

Joseph DeLucia, 59, from Long Island, fatally shot his three siblings and niece before killing himself after a dispute over their late mother’s estate. His mother, Theresa DeLucia, had left her home to be sold and the proceeds divided among her children, leaving Joseph, who had lived there his entire life, homeless. Struggling with mental health issues and panicked about losing his home, Joseph opened fire during a family meeting.

Despite reassurances from his siblings, Joseph believed he was being left out of the estate. He used a legally purchased shotgun to kill his family members inside the home before taking his own life outside. Neighbors and police noted his declining mental state, exacerbated by his mother’s death and fear of displacement.

Authorities revealed that Joseph had dealt with mental health problems throughout his life, and his hoarding tendencies worsened his isolation. His siblings had traveled from out of state for the meeting, and despite their efforts to resolve the situation, Joseph’s deteriorating mental state led to the tragic outcome.

For more information see James Gordon "Simple request in Long Island woman's will sparked her son's devastating shotgun rampage on siblings" The Daily Mail, September 12, 2024.

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

Alleged romantic deception leaves man broke, homeless

Skyler Houston, 29, from Wichita Falls, was charged with exploiting a 66-year-old man by manipulating him into handing over money and property under the promise of marriage. From February to July 2024, she withdrew over $42,000 from his bank account, even stealing his Medicare oxygen equipment, leaving him homeless. Houston’s history includes prior fraud charges, including exploiting a 76-year-old woman and using stolen money to pay her rent.

Houston, currently on probation for other fraud cases, has been arrested nine times since 2020 for fraud, forgery, and credit card abuse. Police are investigating more cases involving elderly victims.

For more information see Larry Statser "Alleged romantic deception leaves man broke, homeless" Texomashomepage.com, September 11, 2024. 

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

Carol Burnett’s Estranged Daughter Erin Hamilton Speaks Out as Son’s Guardianship Ends

Erin Hamilton, Carol Burnett’s estranged daughter, spoke out about her son Dylan’s court-ordered guardianship ending as he turns 18. She expressed excitement about rebuilding their relationship, noting that Dylan graduated from high school and is now attending film school in New York. Erin shared her pride in Dylan’s achievements and her gratitude for the support he received during the guardianship.

In 2020, Carol and her husband became coguardians of Dylan due to Erin's struggles with addiction. Over time, Erin had supervised visitations, although her behavior led to visitation restrictions. Despite this, she maintained her sobriety and expressed her desire to reconnect with her son.

As the guardianship nears its end, Erin reflected on her sobriety journey and the positive steps she’s taken. She highlighted the importance of her job in treatment, her participation in a 12-step program, and her commitment to staying sober. Erin hopes to strengthen her relationship with Dylan as he enters adulthood.

For more information see Ryan Naumann "Carol Burnett’s Estranged Daughter Erin Hamilton Speaks Out as Son’s Guardianship Ends" InTouch, September 9, 2024.

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

Aging in Place Will Be Big Business for Home Builders

Remaining at home is most people’s wish as they get older, unsurprisingly. Older folks generally value familiar surroundings and do better in terms of health if they can age in place at home.

With the cost of nursing home care is soaring to $9,000 per month, on average, older people are more inclined to want to stay in their home as they age. Even though staying at home will save some money, it still requires a lot of renovations to make homes safe and accessible for senior citizens.  

Some of the common home upgrades are familiar items: Adding grab bars, wheelchair ramps, widening entryways, adding ground-floor bathrooms if needed, etc. Others might be less obvious: Raising electrical outlets and lowering switches to make them easier to reach, especially for people in wheelchairs. Switching flooring to softer options that cushion falls, like bamboo over cork. Adding pull-out shelves and lowering countertops in the kitchen to make work surfaces easier to reach.

Then there are the big changes: Adding a master bedroom on the first floor. Swapping bathtubs for lipless showers. Installing wheelchair lifts on the stairs. Constructing a wheelchair ramp leading up to the front entrance of the house. 

Builders are increasingly thinking about catering to age-in-place needs, too. More Realtors are reporting younger clients who say they want a “feet-first house,” a place where they can live for the rest of their lives. One example of thinking ahead: Some builders are stacking closets on upper and lower floors, to create the space for a future elevator, if one is needed. Builders and contractors that are interested can be certified as an Aging in Place Specialist by the National Association of Home Builders (NAHB).

Paying for these improvements can be challenging, of course. Older people who are short on cash but have lots of home equity might consider a reverse mortgage, which doesn’t need to be paid off until the home is sold. But read the fine print first to make sure you understand all the terms and conditions before going that route.

For more information see David Payne, "Aging in Place Will Be Big Business for Home Builders" Kiplinger.com, September 9, 2024. 

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

Article: An Empirical Study of the Distribution of Superannuation Death Benefits

Tobias Barkley (La Trobe Law School) and Xia Li (La Trobe University - Department of Mathematics and Statistics) recently published, An Empirical Study of the Distribution of Superannuation Death Benefits, 2024. Provided below is an Abstract:

In Australia, if a superannuation member dies before retirement, they will leave superannuation death benefits that must be distributed. Death benefits are usually distributed at the discretion of the trustee or, on appeal, by the Australian Financial Complaints Authority (AFCA). Analysis of the distribution of death benefits is exceedingly scarce in the literature. There is some practitioner commentary and case law, but it is conflicted on how this discretion is, or should be, exercised. General trust law holds that trustees exercise broad discretions and have duties to consider all relevant matters, including any non-binding nomination of beneficiaries by the deceased. Other evidence suggests that AFCA does not follow this approach. This article undertakes the first empirical examination of the distribution of death benefits by AFCA. Key findings are 1) there is no evidence that the deceased’s wishes expressed in non-binding nominations have any association with distribution outcomes, and 2) there is a very strong association between receiving a distribution and AFCA’s view that someone was financially dependent on the deceased.

Article: Electronic Communications of Deceased Users: How European Law Can Help Strike a Balance Between Post-Mortem Access and Privacy

Yann Conti (University of Geneva - Faculty of Law) recently published, Electronic Communications of Deceased Users: How European Law Can Help Strike a Balance Between Post-Mortem Access and Privacy, 2024. Provided below is an Abstract:

An issue of particular interest in the emerging field of digital inheritance is whether heirs and/or loved ones have a right to access the electronic communications of the deceased user.

Absent supranational law applicable to this question-and more generally to digital inheritance-, the ways in which Member States have dealt with this issue have given rise to a mosaic of different approaches throughout the European Union.

The situation may well change in the near future, since the matter has been added to the European agenda in the ambit of the Digital Decade Policy Programme of the European Union. In this context, the question arises as to how European law could effectively contribute to the regulation of digital inheritance.

Regarding the access to electronic communications of deceased users, the various solutions developed by Member States reveal strong common grounds from a functional perspective: on the one hand, the firm desire to take into account privacy concerns of the deceased user and, on the other hand, the trend in favor of reinforcing the latter's right to self-determination, which is jeopardized by the terms and conditions drafted by service providers.

This finding takes on its full meaning when we consider that these two fields are precisely where European law can play a significant role. Sensible reforms can be considered regarding two key tools that are in the hands of the European legislator: the General Data Protection Regulation and the Unfair Terms Directive.