Wills, Trusts & Estates Prof Blog

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

Saturday, June 8, 2024

Article: Seeing Through the Sleight of Hand: Estate Tax Consequences of Redeeming Stock With Life Insurance Proceeds

Timothy M. Todd (Liberty University - School of Law) and Philip Manns (Liberty University - School of Law) recently published, Seeing Through the Sleight of Hand: Estate Tax Consequences of Redeeming Stock With Life Insurance Proceeds, 2024. Provided below is an Abstract:

The Supreme Court granted certiorari in Connelly v. United States to resolve a circuit court split concerning the federal estate tax valuation of shares in a closely held corporation when that corporation uses life insurance proceeds to satisfy its obligation to redeem the decedent-shareholder’s shares.

We argue that treating the insurance proceeds as suddenly appearing and then quickly disappearing is akin to the magician’s “now you see it, now you don’t” sleight of hand. Seeing through this sleight of hand, we advance the literature by explaining that the secret to dispelling this illusion is to properly consider the mortality gain, when it occurs, in the insurance policy. To accomplish this, we argue that life insurance used for liquidity purposes in the buy-sell context operates no differently than any sinking fund funded with corporate cash. Consequently, using that sinking fund analogy, the valuation of the corporate shares for estate tax purposes should include the corporation’s mortality gain, when it occurs. We also show that treating the redemption obligation as a liability does not change the value of the corporation because that liability arises from a transformation of the redeeming shareholder’s residual equity claim into a liability claim on corporate assets.

June 8, 2024 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, June 7, 2024

Article: Solutions for Heirs Property Owners

Jesse Richardson (West Virginia University College of Law) and Amber Miller (Crenshaw, Dupree & Milam, LLP) recently published, Solutions for Heirs Property Owners, 2023. Provided below is an Abstract:

What are some solutions for heirs property owners? An offered solution assumes that there is a problem, and the first step must be clearly defining the problem. But, as the authors explain, the term "heirs property" proves difficult to define because of the vast number and scope of heirs property scenarios. Stated very simply, the term refers to a subset of tenancy in common property where the owners received concurrent interests in land through inheritance. But, heirs property is anything but simple. In fact, it is quite complex, beginning with the ownership picture of heirs property tracts of land: the owners are typically related and may number in the dozens, hundreds, or thousands.

The core issues arising from heirs property relate to the legal form of ownership - tenancy in common. Tenancy in common ownership is defined by certain key characteristics that have likely contributed to the complexity of how best to resolve heirs property, particularly in agriculture. Therefore, this article begins by explaining heirs property, and the overarching form of ownership, tenancy in common.

The authors then identify and discuss two major areas of concern with respect to heirs property generally, and more specifically with respect to heirs property that is utilized in production agriculture. First, the economic (or efficiency) concern refers to the fact that the cotenants cannot put the property to its maximum economic use. Second, the vulnerability (or displacement) concern arises where one cotenant fears loss of their fractional interest due to the unilateral actions of another cotenant.

The article goes on to explore potential solutions for heirs property, and particularly those heirs properties that are used in agriculture, including 2018 Farm Bill provisions that attempt to alleviate some of the economic impact of heirs property on farm operators, as well as other policy innovations and draft uniform laws that seek to address heirs property and the impacts of partition on heirs property used in agriculture.

The Article concludes by making recommendations to agricultural attorneys on addressing both the prevention and resolution of heirs property and making policy recommendations. Along the way, the authors uncover a neglected barrier to resolution of heirs property issues- the lack of sufficient state legislation addressing the clearing of title for heirs property. The authors conclude that heirs property constitutes an urgent problem in the United States, because many acres of farmland lie idle due to the effects of heirs property. There is a need for a sense of urgency in order to address the heirs property conundrum and potentially unlock huge amounts of economic development presently trapped in heirs property.

June 7, 2024 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Thursday, June 6, 2024

Article: The Nation's Transfer Tax Regime and the Tax Gap

Jay A. Soled (Rutgers University) recently published, The Nation's Transfer Tax Regime and the Tax Gap, 2024. Provided below is an Abstract:

For over a century, the nation’s transfer tax regime, comprised of the gift, estate, and generation-skipping transfer taxes, has played a pivotal role in curbing inherited wealth while simultaneously raising much-needed revenue. But for a variety of reasons, a sizable number of taxpayers are derelict in fulfilling their transfer tax obligations. This analysis explores the reasons for this phenomenon and the reforms that Congress should consider instituting to curb this behavior.

June 6, 2024 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Wednesday, June 5, 2024

Article: Donationes Mortis Causa of Real Property: Missed Opportunities and Foreclosed Possibilities

David Pittavino (University of New South Wales) and Xavier Walsh (Independent) recently published, Donationes Mortis Causa of Real Property: Missed Opportunities and Foreclosed Possibilities, 2024. Provided below is an Abstract:

The doctrine of donatio mortis causa defies and problematises the taxonomy of the common law. It stands both as an archaic monument to Western legal thought several millennia old, and as an informal, intimate, and human mode of disposition of property in the face of death. In New South Wales, there is stark resistance to extending the doctrine to gifts of real property. This article examines the justifications usually proffered for that resistance; critiques the strengths thereof; and argues that none, as a matter of doctrine, survives proper scrutiny. Part I of this article outlines three common objections raised against donationes mortis causa of realty, and contends that each fails fully to accord with fundamental tenets of the doctrine, in both its historical and contemporary contexts. Part II of this article explores the place for donatio mortis causa in the era of e-Conveyancing, and suggests that, in relation to Torrens Title land, any room left for the doctrine is now confined to circumstances where a donor transfers legal title to the property to the donee, revocation of which may give rise to an in personam exception to indefeasibility of title.

June 5, 2024 in Articles, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Tuesday, June 4, 2024

The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart

Screenshot 2024-06-04 at 7.43.33 AMEstate planning for blended families involves unique challenges and requires careful consideration to ensure fair treatment of all family members, especially children from previous marriages. Key strategies include setting up various types of trusts to provide for the surviving spouse while safeguarding the interests of the children. For example, revocable living trusts offer flexibility during the grantor's lifetime but may not protect children's inheritance if the surviving spouse controls the trust. To mitigate this risk, irrevocable trusts like Bypass Trusts or QTIP Trusts can be used to ensure that assets are distributed according to the original intentions even after the death of one spouse​.

Communication is crucial in blended family estate planning to prevent misunderstandings and conflicts. Early and transparent discussions about the estate plan can help set expectations and ensure that all family members understand how the assets will be managed and distributed. Regular updates to the estate plan are essential as family dynamics and financial situations change over time. Involving a specialized estate planning attorney with experience in blended families can provide valuable guidance and help navigate complex issues like beneficiary designations, which can override wills or trusts if not properly managed​.

Prenuptial agreements and revisiting estate plans after major life events, such as remarriage or relocation, are important steps to ensure that the estate plan remains aligned with the family's goals and current laws. Trusts can offer detailed instructions on asset distribution and provide privacy compared to wills. Regular reviews of estate plans, including updating beneficiary designations and considering state-specific laws, can help avoid potential legal pitfalls and ensure that the estate plan accurately reflects the grantor's wishes​. 

For more information see Ashlea Ebeling "The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart", The Wall Street Journal, June 1, 2024.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.

June 4, 2024 in Estate Planning - Generally | Permalink | Comments (0)

Monday, June 3, 2024

Physically healthy Dutch woman dies by assisted suicide at age 29

Screenshot 2024-06-02 at 4.56.15 PMZoraya ter Beek, a 29-year-old Dutch woman, chose assisted suicide after struggling with severe mental health issues, including depression, anxiety, and autism. Diagnosed at 21 and plagued by bullying and a sense of not fitting in, she wore a "Do Not Resuscitate" tag by age 22. Despite trying various treatments, including electroconvulsive therapy, her condition did not improve.

Living with her boyfriend, Stein, she applied for euthanasia in 2020 after her psychiatrist told her there was no hope for recovery. Ter Beek saw herself as an advocate for the Dutch euthanasia system, which she believed had strict safeguards. Despite seemingly perfect physical health, her mental suffering was deemed unbearable, fulfilling the criteria for legal euthanasia in the Netherlands.

Her case highlights the complexities of assisted suicide, particularly concerning mental illness. Ter Beek opposed easily accessible "suicide kits" and stressed the need for safeguards to protect vulnerable individuals. Her death, part of a rising trend in euthanasia for psychiatric reasons, underscores the ongoing debate about assisted suicide laws and mental health.

For more information see Kendall Tietz "Physically healthy Dutch woman dies by assisted suicide at age 29", Fox News, June 1, 2024.

June 3, 2024 in Death Event Planning, Estate Planning - Generally | Permalink | Comments (0)

Sunday, June 2, 2024

John Lennon’s lost guitar sold for nearly $3M — and you’ll never guess where it was found

Screenshot 2024-06-02 at 9.31.47 AMA guitar once owned by John Lennon, which had been lost for over 50 years, was recently sold at auction for nearly $3 million. The instrument, a rare 1962 Gibson J-160E, went missing after a Beatles concert in 1963 and was presumed lost forever. Miraculously, it was discovered by a guitarist in San Diego, who had unknowingly purchased it in the 1970s. The guitar's provenance was confirmed through meticulous research and comparisons with photographs of Lennon playing it during the early Beatles years.

The guitar is notable not only for its connection to Lennon but also for its role in the creation of some of the Beatles' early hits. Lennon and George Harrison both used this model to compose iconic songs like "I Want to Hold Your Hand" and "She Loves You." Its return to the public eye has been celebrated by Beatles fans and music historians alike, highlighting its significance in the band's history and its contribution to their groundbreaking sound.

The sale of Lennon's guitar at Julien's Auctions fetched a staggering $2.41 million, making it one of the most expensive guitars ever sold. This event underscores the enduring legacy and immense value placed on Beatles memorabilia. Collectors and fans continue to cherish artifacts from the band, reflecting the profound and lasting impact of the Beatles on music and popular culture.

For more information see Eric Todisco "John Lennon’s lost guitar sold for nearly $3M — and you’ll never guess where it was found", Yahoo Entertainment, May 30, 2024.

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

June 2, 2024 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Saturday, June 1, 2024

Cher wins years-long legal battle over royalties with Sonny Bono’s widow

Screenshot 2024-06-01 at 11.59.21 AM

Cher has emerged victorious in a prolonged legal battle over royalties from her ex-husband and former musical partner Sonny Bono. The dispute, which spanned several years, centered around Cher’s entitlement to Sonny's royalties following his death in 1998. The legal contention began when Sonny's widow, Mary Bono, attempted to terminate Cher’s right to these royalties. However, a federal judge ruled in Cher's favor, affirming her ongoing right to the royalties as per the original agreement made during their 1975 divorce.

This victory is a significant milestone for Cher, not only affirming her legal rights but also securing her financial interests linked to her early career. The royalties in question pertain to hits from the Sonny & Cher era, including classics like "I Got You Babe" and "The Beat Goes On." These songs have not only been cultural landmarks but have also generated substantial revenue over the decades. The court’s decision underscores the importance of adhering to contractual agreements, even decades after they were made, and highlights the enduring financial implications of early career successes.

The ruling also sets a precedent for similar cases involving intellectual property and the rights of ex-spouses. Cher’s legal journey underscores the complexities that can arise in managing and distributing royalties, especially when multiple parties are involved. For artists and their estates, this case serves as a reminder of the long-term impact of divorce settlements and the necessity of clear, enforceable contracts. As Cher continues to celebrate this legal win, it also serves as a testament to her enduring legacy and the lasting value of the music she created with Sonny Bono.

For more information see Elizabeth Stanton, "Cher wins years-long legal battle over royalties with Sonny Bono’s widow" Fox Business, May 30, 2024.

June 1, 2024 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Friday, May 31, 2024

Article: Policy over Doctrine: A Brief History of US Trust Law

Lucas Clover Alcolea (University of Otago - Faculty of Law) recently published, Policy over Doctrine: A Brief History of US Trust Law, 2023. Provided below is an Abstract:

US trust law is unique because whereas in English law the settlor drops out of the picture once he has created the trust, in the US the settlor’s intentions remain paramount. This fundamental difference in turn permits the recognition of spendthrift trusts, whereby the beneficial interest cannot be alienated, in the US whereas in England such trusts are generally invalid. Similarly, whereas in English law the beneficiaries of absolute trusts, and on occasion discretionary trusts, can collectively implode the trust by forcing the trustee to convey the trust fund to them via a Saunders v Vautier application, this is generally not possible in the US. It is suggested that this key difference results from the fact that US law is, at heart, policy-based rather than doctrinal whereas the opposite is true for English law.


May 31, 2024 in Estate Planning - Generally, Trusts | Permalink | Comments (0)

Thursday, May 30, 2024

Identity thief claims to be behind Graceland foreclosure attempt: report

Screenshot 2024-05-21 at 9.17.15 PMA man claiming to be the mastermind behind a scheme to foreclose Elvis Presley's Graceland mansion has revealed his involvement in an interview with The New York Times. The purported fraudster stated that he works with a crew that targets vulnerable individuals to steal properties using falsified documents. The attempt to auction Graceland was allegedly based on a forged loan agreement supposedly taken out by Lisa Marie Presley.

Riley Keough, the granddaughter of Elvis and sole heir to Graceland, challenged the foreclosure in court, asserting that the loan agreement was fraudulent. She obtained an injunction to halt the sale. The company behind the foreclosure attempt, Naussany Investments and Private Lending, claimed Lisa Marie owed them $3.8 million, but withdrew their claims after the court hearing.

The Tennessee Attorney General has launched an investigation into the matter. The alleged identity thief, who communicated with the Times via email, admitted to orchestrating the scam, targeting properties using forged documents. The case remains complex, with questions about the legitimacy of Naussany Investments and the authenticity of the documents used in the foreclosure attempt.

For more information see Michael Dorgan "Identity thief claims to be behind Graceland foreclosure attempt: report", Fox News, May 28, 2024.

May 30, 2024 in Current Events, Estate Planning - Generally | Permalink | Comments (0)