Wills, Trusts & Estates Prof Blog

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

Sunday, August 25, 2019

Article on Disrupting the Wealth Gap Cycles: An Empirical Study of Testacy and Wealth

MoneyDanaya C. Wright recently published an Article entitled, Disrupting the Wealth Gap Cycles: An Empirical Study of Testacy and Wealth, 2019 Wis. L. Rev. 295-323 (2019). Provided below is an introduction of the Article.

When many of us think about the wealthy, we assume that they have inherited wealth, trust funds, or at least a history of knowing the right people. There are always a few stories of the hard-working immigrants who pulled themselves up by their bootstraps, as well as the spendthrift scions of wealthy families who manage to squander vast riches in a remarkably short period of time. But we rarely hear about the vast numbers of modest and obscure families that grow wealth carefully from generation to generation, keeping their wealth and their family skeletons away from the spotlight. How those families grow and maintain their wealth is through judicious use of tax mechanisms to minimize income and estate taxes, judicious use of trusts to reduce squandering wealth by irresponsible children and grandchildren, and through estate plans that channel property to those who will protect it, use it wisely, and pass it on in ways that maintain the wealth.

In early-modern England, estate planning was usually done earlier than we do it today, when children were young enough to be influenced and when parents had a good sense of their children's personalities. It was done when the patriarch had sons about to marry and he could convince them to accept limitations on family property in exchange for access to income immediately to allow him to start a family. When the son's children came of marrying age, the hope was that he would have imbibed the spirit of protecting the family property and would willingly accept continued constraints, impose them on his children and, if everyone played along, the family dynasty would be protected through a strict settlement renegotiated at each generation. The use of trusts and conservative trustees was crucial to keep wayward family members in line by denying them access to income if they bucked the system.

For those in Jane Austen's day, estate planning came at mid-life, when new families were being formed. In our day, estate planning comes at the end of life, as each generation usually hangs on to property, especially earned wealth, perhaps to lord it over neglectful children, but more often because the best way to deal with the uncertainty of the future is to retain control as long as possible. But hanging on to property until the end puts the owner at risk that he will die without making appropriate plans and his estate will be dissipated through family squabbles, probate delays and expenses, and that dreaded of all wealth-destructors: the estate tax.

The common denominator for most people who want to grow and protect wealth has been capable estate planning, planning that provides adequate resources for the current generation, protects the principal for the future, and provides flexibility so that each generation gets what it needs without constraining the property too severely. The trust is the most common mechanism for preserving wealth, but it is not the only mechanism. Life estates, pre-nuptial contracts, powers of appointment, and joint tenancies have provided ways to protect assets while providing for basic needs of future generations. More recently, living and asset-protection trusts, beneficiary designations, and TOD real-estate deeds have made estate planning even easier for the wealthy and the not-so-wealthy alike.

This panoply of estate planning options, however, seems to have passed by many who could really benefit from it. The person of modest wealth who dies without any estate planning risks having her property be dissipated to pay for guardianships, probate, and shares for heirs, regardless of their need or ability to manage property. Those who die young, before they have amassed much wealth, and those who die without proper estate planning will often leave little for their dependents, heirs who themselves will suffer from lack of investment in human capital by their parents and grandparents, thus leaving them less likely to earn significant wealth and less likely to have sufficient wealth to pass on to the next generation. The cycle of wealth-building by those who already have wealth is enhanced by probate and tax laws, while the cycle of wealth-destruction is perpetuated by administration costs, onerous legal requirements, and everyday inequalities. While many structural factors may contribute to the dissipation of wealth by some and the accumulation of wealth by others, one factor that seems to correlate closely to the various wealth gaps is dying intestate and having one's property pass by the default statutory rules of intestate succession, and dying testate and having one's property pass according to the wealth-saving mechanisms and procedures of planned wills and will-substitutes.

In an empirical study of all decedents dying in 2013 in Alachua County, Florida whose estates were probated, either testate or intestate, the data show striking correlations between intestacy and lower wealth, and testacy and greater wealth. And the demographics of those who died intestate correspond to the demographics of those people at risk of falling into the cycle of wealth-dissipation. To explore the possible effects of intestacy and testacy on wealth and property succession, I analyzed 408 estates (293 testate and 115 intestate) across a variety of categories, including wealth, age, race, sex, and marital status. All of these lines of inquiry support the claims by many economists that wealth gaps between men and women, white and black, or married and unmarried couples are growing and should be of great concern to lawmakers. This study supports those claims and ends by calling for more focus on how to bring estate planning services to the populations most vulnerable to dying intestate.

August 25, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Texas Court Concludes There was a Fact Question as to Whether A Hand-Written Document was a Will

WillThe decedent handwrote and signed a document which provided, “Karen Grenrood is my executor, administrator, [and] has all legal rights to my estate in the case of my untimely or timely death.” The contestants claimed that this document lacked testamentary intent and thus is not a will which is admissible to probate. The trial court agreed.

The appellate court reversed. Consistent with the Texas Supreme Court case of Boyles v. Gresham, 263 S.W.2d 935 (1954), the court held that a document which appoints an executor can be a will even if it does not make an effective disposition of the testator’s property. The court also quoted Estates Code § 22.034(2)(A) which defines the term “will” as including an instrument which merely appoints an executor. In addition, the court held that the decedent’s document is ambiguous and could actually dispose of the entire estate to Karen by stating that she has “all legal rights” to his estate. [The court did not, however, order the document admitted to probate because the contestants also alleged undue influence, an issue the trial court had yet to resolve.]

See David Fowler Johnson, Texas Court Concludes There was a Fact Question as to Whether A Hand-Written Document was a Will, Texas Fiduciary Litigator, August 17, 2019.

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

August 25, 2019 in Current Affairs, Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)

Saturday, August 24, 2019

Aretha Franklin Died with $1 Million in Uncashed Checks

ArethaAn inventory of Aretha Franklin's assets found almost $1 million in uncashed checked among her possessions.

Among the checks was a single one of $702,711.90 from Sound Exchange and the Screen Writers Guild and $285,944.27 in checks from her publishing company, Springtime Publishing, EMI, BMI, Carlin Music and Feel Good Films. The grand total was $988,656.17.

See Singer Died with $1 Million in Uncashed Checks, CNN, August 23, 2019, see also Brie Stimson, Aretha Franklin had Nearly $1M in Uncashed Checks When She Died 1 Year Ago, Fox News, August 24, 2019.

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) and Adam J. Hirsch (Professor of Law at the University of San Diego School of Law) for bringing these articles to my attention.

August 24, 2019 in Estate Administration, Estate Planning - Generally, Music | Permalink | Comments (0)

Friday, August 23, 2019

David Koch, Billionaire Who Fueled Right-Wing Movement, Dies at 79

KochDavid H. Koch, the billionaire that helped reshape American politics with a particular brand of libertarianism, has died at the age of 79 at him home in Manhattan. His death was announced by his younger brother and business partner Charles Koch, which noted that David Koch had been treated for prostate cancer in 27 years ago.

Koch was one of the word's richest men, with assets of $42.2 billion in 2019 and a 42% stake in the global family enterprise, Koch Industries. He was a known philanthropist with more than $1.2 billion in charitable gifts and the Libertarian Party’s candidate for vice president in 1980. David and Charles also helped give rise to the Tea Party movement and strengthened the far-right wing of a resurgent Republican Party, though he claimed to have never attended a Tea Party event. The Koch brothers also had personal and political differences with President Donald Trump, primarily restrictive trade and immigration policies as divisive. Charles threatened to withhold the family’s support for Republican candidates who opposed the free-trade, government-shrinking policies at the heart of the Koch political philosophy.

David had palatial homes on Park Avenue in Manhattan and in Southampton, N.Y., Aspen, Colorado, and Palm Beach, Florida. He also kept a yacht in the Mediterranean for summer getaways and rented it out for an astounding $500,000 a week. His friends and acquaintances included Bill and Melinda Gates, Prince Charles and Winston Churchill’s grandson Winston Spencer Churchill.

In his earlier days, his grandiose 6'5" height helped him earn the Massachusetts Institute of Technology's basketball team's single-game scoring record of 41 points. David Hamilton Koch was born in Wichita, Kansas on May 3, 1940, the third of four sons of Fred Chase Koch and the former Mary Clementine Robinson. His brothers are Frederick, seven years older; Charles, five years older, and David’s twin, William. His father died in 1967 and his sons inherited significant stakes in the oil company he had created.

See Robert D. McFadden, David Koch, Billionaire Who Fueled Right-Wing Movement, Dies at 79, New York Times, August 23, 2019.

August 23, 2019 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

What Jeffrey Epstein’s Last-Minute Will Means for Accusers Trying to Recover Money From His Estate

EpsteinThe death of Jeffrey Epstein, millionaire financier indicted on federal sex trafficking charges, stunned the country, especially after he had previously attempted suicide and had been in a special holding cell. But what raised more questions was the discovery that only two days prior to his demise, he had written a will leaving his entire estate - all $577 million of it - to a private pour-over trust. This development could mean that claims against the estate from lawsuits of sexual assault victims will take longer and be much more complex.

“It could take many, many years before anybody gets a penny of this, and it all depends, too, on how much the executors want to fight it,” says Gerry Beyer, a law professor at Texas Tech University and an expert in estate planning, wills and trusts. “The number of unanswered questions is beyond phenomenal.”

Two longtime employees of Epstein were named as executors, Darren Indyke and Richard Kahn. The alternative executor is a biotech venture capitalist, Boris Nikolic, who said he was "shocked" to have been named and will forgo the responsibility if he should be called on. The executors will pursue any claims against the estate and ensure that the remaining assets are received by the trust beneficiary, which were not named in the will.

Bridget Crawford, a professor at Pace Law School teaching wills, trusts, and estates, said that, “The bottom line is a probate court in the Virgin Islands isn’t going to allow a dime to go out of that estate—to you, to me, to the trust—until the claims are settled, so this thing is going to be tied up for years. We may never know who the beneficiaries of that trust are, but it doesn’t matter from the perspective of the civil claimants.”

See Katie Reilly, What Jeffrey Epstein’s Last-Minute Will Means for Accusers Trying to Recover Money From His Estate, August 20, 2019.

August 23, 2019 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Trusts, Wills | Permalink | Comments (0)

Thursday, August 22, 2019

10 Most Expensive US States to Die in

BeachNew research compiled by the personal-finance website GOBankingRates, the National Funeral Directors Association and the National Bureau of Economic Research configured a list of the 10 most expensive states to die in after figuring the median out-of-pocket funeral costs and median end-of-life medical care in each of them and Washington, D.C. It is not surprising that the two of the most expensive states to live in - California and New York - also made this list.

The top 10 states that will cost more to die in are, from least to most:

  • Rhode Island
    • Average funeral expenses: $9,269
    • Average end-of-life medical costs: $16,398
  • New Jersey
    • Average funeral expenses: $9,712
    • Average end-of-life medical costs: $17,181
  • Connecticut
    • Average funeral expenses: $9,914
    • Average end-of-life medical costs: $17,538
  • Maryland
    • Average funeral expenses: $10,069
    • Average end-of-life medical costs: $17,812
  • Alaska
    • Average funeral expenses: $10,084
    • Average end-of-life medical costs: $17,840
  • Massachusetts
    • Average funeral expenses: $10,216
    • Average end-of-life medical costs: $18,073
  • Oregon
    • Average funeral expenses: $10,418
    • Average end-of-life medical costs: $18,430
  • New York
    • Average funeral expenses: $10,799
    • Average end-of-life medical costs: $19,103
  • California
    • Average funeral expenses: $11,777
    • Average end-of-life medical costs: $20,834
  • Hawaii
    • Average funeral expenses: $14,975
    • Average end-of-life medical costs: $26,492

See Shawn M. Carter, 10 Most Expensive US States to Die in, Fox News, August 20, 2019.

August 22, 2019 in Current Affairs, Death Event Planning, Elder Law, Estate Planning - Generally | Permalink | Comments (0)

CLE on Estate Planning for Every Phase of Life

CLEThe National Business Institute is holding a webinar entitled, Estate Planning for Every Phase of Life, on Wednesday, September 11, 2019 at 12:00 PM - 3:15 PM Central. Provided below is a description of the event.

Advise Clients of All Ages with Confidence

Clients at each stage of life pose unique estate planning challenges that even the most skilled advisor may overlook. Are you prepared to address the concerns of individuals of all ages, from young parents considering a will for the first time, to retirees planning for long-term care? This program will provide you with practical guidance on how to apply fundamental planning techniques to your client's specific circumstances. Address the estate planning concerns of individuals at all stages with certainty - register today!

    • Provide your clients with peace of mind by establishing a plan for guardianship and custody of minor children.
    • Understand what estate planning documents need to be updated after a divorce.
    • Work with your clients to create a plan for charitable giving.
    • Help your aging clients understand what their adult children need to know about their parents' estate plan.
    • Review the essential documents needed at each stage of life.

Who Should Attend

This program is designed for attorneys. Accountants and paralegals may also benefit.

Course Content

    • Retirees: Planning for Long-Term Care and Grandchildren
    • Clients of Advanced Age
    • Essential Documents Needed at Each Stage of Life
    • Estate Plan for a Young Married Couple
    • Divorced and Remarried Clients
    • Clients with Charitable intent

August 22, 2019 in Conferences & CLE, Disability Planning - Health Care, Disability Planning - Property Management, Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (1)

Wednesday, August 21, 2019

Epstein Probate Documents

EpsteinFor your reading pleasure, here is Jeffrey Epstein's will as well as all of the documents filed in the probate proceedings in the Virgin Islands.

August 21, 2019 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Trusts, Wills | Permalink | Comments (0)

Article on Voice, Strength, and No-Contest Clauses

WilltestamentKaren J. Sneddon recently published an Article entitled, Voice, Strength, and No-Contest Clauses, 2019 Wis. L. Rev. 239-268 (2019). Provided below is an abstract of the Article.

His will was read, and like almost every other will, gave as much disappointment as pleasure.

- Jane Austen

The will is a unilateral written disposition of probate property to be effective upon the will-maker's death. To have any legal effect, however, the will-maker's family, beneficiaries, and personal representatives, along with the probate court, need to implement the will provisions. To buttress the strength of the will, the language of the will is definitive, certain, and strong. But when the will relies upon standardized language, the voice of the will-maker is flattened or even non-existent. The absence of the will-maker's voice may jeopardize the legal effect of the will.

This Article argues that the over-reliance on "time-tested" formulaic language endows the will with a mechanical, masculine voice that is ill-fitting for most testators and does not advance the goals of testators. Specifically, this Article will focus on the use and language of the no-contest clause. Will-makers and will-drafters have long abandoned the language of in terrorem clauses that threaten eternal damnation for anyone who seeks to alter the terms of the will. The replacement language uses false strength to intimidate beneficiaries by referencing a potential forfeiture of a testamentary gift. The standard no-contest clause has continuing appeal to testators and drafters, despite concerns raised about the flattening of the testator's voice and provocative nature of the language.

This Article argues that the value of the no-contest clause is undermined by the generic, hollow language replicated in form no-contest clauses. Rather than discouraging will contests, the language may actually encourage will contests. To support this argument, this Article first sets the concept of voice in the context of testamentary language. This Article next examines the purpose, structure, appeal, and concerns of the no-contest clause. Then, this Article reviews how courts, focusing particularly on cases decided across the country within the last five years, have interpreted the language in no-contest clauses. This Article concludes by emphasizing how the reliance on "time-tested" formulaic language perpetuates stereotypes, most specifically gender stereotypes, and inhibits drafting innovation. After all, a will is more than a mere legal instrument that transfers widgets and greenacres. The voice in the will should be authentic and genuine.

 

August 21, 2019 in Articles, Estate Administration, Estate Planning - Generally, Wills | Permalink | Comments (0)

Tuesday, August 20, 2019

The Drama Intensifies: Epstein Made a Will and a Trust Days Before He Died

EpsteinJeffrey Epstein, the 66-year-old former hedge-fund manager indicted for federal sex trafficking charges that killed himself this past week, signed a will a mere two days before he hung himself. The will was entered into court on August 15 in the US Virgin Islands where Epstein owned two isles, along with his death certificate from August 11, just a day after his death and before his death was ruled a suicide on August 16.

The will's executors  are two longtime Epstein employees: lawyer Darren Indyke and businessman Richard Kahn. The will both receive $250,000 plus "reasonable expensive" for their work executing the will, which also includes  "investigating potential debts and claims of the Estate and at this time they are unknown.’’ . The document was witnessed by Mariel Colon Miro, a criminal defense attorney who represented drug pin Joaquin “El Chapo’’ Guzman and allegedly gave his wife a cell phone to contact Guzman and Gulnora Tali, who is also an attorney with a private practice.

The tricky part is that Epstein also created a pour-over trust, called the 1953 Trust, that transferred all of his assets - all $578 million - also on August 8th. The trust is a private document that does not name the individual trustees, just saying that the trustees will receive his entire estate. The will names Epstein's only heir as his brother, Mark Epstein. The trust could make collecting damages for lawsuits by sexual assault victims more difficult.

The two documents values his estate similar to the unsuccessful bail request, except that it includes a list of “Aviation Assets, Automobiles and Boats,’’ a collection worth $18,551,700, and an art collection that needs to be appraised.

See Epstein Created Trust With $578 Million Days Before Suicide, MSN, August 20, 2019; see also Priscilla DeGregory & Kate Sheehy, Jeffrey Epstein Signed Will Just Two Days Before Suicide, New York Post, August 19, 2019.

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) and Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing these articles to my attention.

August 20, 2019 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Trusts, Wills | Permalink | Comments (1)