Wills, Trusts & Estates Prof Blog

Article on Is the Trustee-Beneficiary Relationship Necessarily Fiduciary

Tobias Barkley published an Article entitled, Is the Trustee-Beneficiary Relationship Necessarily Fiduciary, Wills, Trusts, & Estates Law eJournal (2014). Provided below is an abstract of the Article.

This paper is about the relationship between trust law and the concept of a fiduciary. The traditional position on this relationship is that express trustees are necessarily fiduciaries. However, developments in trust drafting practice and their implicit acceptance by the courts have put the relationship between fiduciary and trustee under strain, with the result that there appears to be a divergence between the fundamental obligations of a trustee and the fundamental obligations of a fiduciary.

'Aunt Bee' of the Andy Griffith Show Left 100K for Small Town Police

Frances Bavier, the actress who played Aunt Bee in the classis Andy Griffith Show, appeared to be highly appreciative of her local police department. Bavier lived in Siler City, North Carolina in her later years solo with an astounding 14 cats. She passed away at the age of 86 in 1989 and her will specified that $100,000 go toward a trust fund for the police. The principal of the trust fund is kept at $100,000, while the interest is divided among the police staff of around 20 every year for a Christmas bonus around December 15.

Floyd Bowers, who worked at an Exxon station in the town, told the press in 2004 that Bavier "liked her privacy, and she was hard to please. My wife worked at the hospital, and she was what the nurses call a hard patient.” Though she may have been difficult to deal with, locals believe that it was a nice last gesture by the woman.

See Amy Lieu, Frances 'Aunt Bee' Bavier of the Andy Griffith Show Left 100g for Police in Small Town of North Carolina Report, Fox News, January 11, 2019.

 

You Must Plan for Your Clients' Extramarital Affairs

Relationships that occur outside of the marriage happen enough that advisors should be aware of the situations arising from them even though not every client will need that particular advice. The extramarital relationship can have particular repercussions if the married person is affluent. The relationship can be short flings or long-term affairs, and the longer the affair the more likely the "stranger to the marriage" may feel entitled to certain assets or a certain percentage of the person's estate.

The conversation to convince the client to be honest about the affair may be awkward, but it could be pivotal to be forward thinking and cover all aspects of the client's testamentary desires. Clarity about the financial aspects of the relationship supported by legal documentation and legal structures can be very beneficial. An irrevocable trust with the paramour designated as the beneficiary can be effective to make sure they are provided for after the client's death while also guaranteeing that a jilted spouse or disenchanted descendants cannot alter it.

What about a rejected lover? "Hell hath no wrath like a woman scorned." The entanglement of embarrassment and revenge may add a certain spice to Hollywood movies but it does not do any favors for clients. Astute wealth planning and carefully worded nondisclosure agreements with substantial legal penalties can be effective in these unfortunate situations.

See Russ Alan Prince, Russ Prince: Yes, Advisors, You Must Plan for Your Clients' Extramarital Affairs, Financial Advisor Magazine, January 10, 2019.

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

Article on More Moves in Constructive Trusts and Estoppel

Martin Dixon recently published an Article entitled, More Moves in Constructive Trusts and Estoppel, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article.

Analyses the law of constructive trusts and its connection to statutory formalities, including the Pallant v Morgan equity.

9 Ways to Gift Your Assets to Charity

Donating to charity can be done for a multitude of reasons: giving back to society, tax saving, creating or extending a family legacy, or standing behind a specific cause or foundation. Whatever the purpose behind the giving, it is important to understand the various ways you can give to maximize impact while reaping the applicable benefits.

Here are a number of avenues to donate your assets to charity.

1. Outright Gifts of Cash, Securities and Real Estate
   • This is the easiest way, and the majority of charities accept this method.
2. Giving Tangibles
   • Art and other collectibles are governed by different rules, and many charities may not be equipped to accept the gifts. If the organization is able to accept the gifts, the associated income tax deduction also depends on other factors.
3. Charitable Gift Annuity
   • This arrangement is part charitable gift, part purchase of an annuity contract with a term equal to the life of the donor.
4. Donor-Advised Funds
   • DAFs are accounts set up within a charitable organization, and the donor contributes personal assets to the account where the contribution can be invested and grow tax-free until a grant is made to a qualified charity.
5. Retained Life Estate
   • The donor can gift a home, farm, or other form of property to a charitable organization but retain a life estate. When the donor dies, the property passes to the charity.
6. Family Foundations
   • Foundations require significant administrative oversight, and the average person may not be able to create one. For those clients than can create a foundation, they can maintain complete control and pass that control on to others.
7. Charitable Remainder Trust
   • This is an irrevocable trust where the grantor or other non-charity receives a certain stream of income during the term of the trust, then the remainder passes to a charitable organization when the trust ceases to exist.
8. Charitable Lead Trust
   • This is an irrevocable trust where a charity or charities receive a certain amount during the term of the trust, then the remainder passes to the donor's heirs and the culmination of the trust.
9. Charitable LLC
   • This is a new method, and is governed by applicable state corporate law. The LLC is not tax-exempt, but the income tax liability as well as deductions and losses are passed through.

See Catherine Schnaubelt , 9 Ways to Gift Your Assets to Charity, Forbes, January 9, 2019.

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

Spinning Straw into Gold: Modifying Irrevocable Trusts

Irrevocable trusts have been part of estate planning for years. They have been used for a variety of purposes, such as to remove assets from a person's estate in order to reduce taxes, to protect assets from creditors, and to provide management of assets for beneficiaries. Historically, these trusts could run for perhaps 100 years or so, but often terminated much earlier than that. More recently, many states have eliminated or modified their laws so as to allow trusts to run forever, or at least for periods that are, for all practical purposes, forever. In addition, creditor protection has become much more important to some persons given the litigious nature of our society. The larger generation-skipping tax exemption has also fueled an increased interest in keeping assets in trust to avoid future taxes. Thus, there are now many more trusts that will run for very long periods than used to be the case.

Many clients wish to have the benefits of an irrevocable trust but do not like the idea that the trust is actually irrevocable. Estate planners have also sought ways to modify trusts that are irrevocable as a result of changed circumstances or because the planner's client is the beneficiary who objects to the terms of the trust. In response to this, state laws have been evolving over time to permit changes to what were once instruments that could not be modified. These changes raise several issues, both legal and otherwise.

For fiduciaries, this brave new world can be a minefield, exposing the fiduciary to possible litigation for making, or perhaps for not making, a change that state law now permits.

See Sarah Change & Scott Bieber, Spinning Straw into Gold: Modifying Irrevocable Trusts, ThompsonCoburn.com, January 8, 2019.

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

Stock Trader, 45, Tried to Frame Daughter, 9, for Wife's Murder

Rod Covlin was 36 years old when he allegedly murdered his estranged wife on New Year's Eve of 2009. Shele Danishefsky Covlin, who was 47 at the time of her death, was in the middle of divorcing Rod and had a meeting arranged the next day to have him written out of her will. Her body was found in the bathtub of her Manhattan apartment and due to the strict religious beliefs of her Jewish family, no autopsy was performed at the time. However, her body was exhumed in 2010 and the medical examiner determined that she had been strangled.

The prosecution alleges that in 2013, Rod wrote an Apple note pretending to be his daughter Anna that supposedly confesses to pushing Shele into the bathtub and causing her mother's death. Anna was 9 years old at the time and in fact was the one that found Shele's body at 7 a.m. 

After the autopsy, Shele's family filed a wrongful death suit against Rod, though he was still not yet charged with murder. The judge ruled that Rod was not able to gain any of the money left to him in the will, nor that of the trust for the children, Anna and Myles. The children were placed in the care of Rod's parents after worries that he was abusive to Myles. In 2015, Rod was recorded by a girlfriend hatching a plan to marry off Anna to a Mexican teenage boy for $10,000. His hope was that once Anna was married, she would technically no longer be a minor, and Rod would have access to the $4 million trust fund left to the children by Shele.

See Jennifer Smith, Stock Trader, 45, 'Tried to Frame Daughter, 9, for Wife's Murder,' Daily Mail, January 8, 2019.

Special thanks to Molly Neace for bringing this article to my attention.

Article on Fiduciary Litigation in Louisiana: Litigation Against the Mandatary (Agent), Executor, and Trustee

Elizabeth Ruth Carter recently published an Article entitled, Fiduciary Litigation in Louisiana: Litigation Against the Mandatary (Agent), Executor, and Trustee, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article. 

These materials were created and presented in connection with LSU's annual Estate Planning Seminar. The paper explores the various types of fiduciary litigation in Louisiana that arises in the estate planning and administration setting. The paper considers the various types of actions and remedies available, the types of proceedings, and the parties with standing.

George Steinbrenner’s Estate Gets a Big Tax Break

On October 9, 2018, Manhattan Surrogate Court Judge Rita M. Mella ruled that a QTIP (qualified terminable interest property) marital trust does not fall under New York estate taxation if the surviving spouse was pre-deceased by a spouse who died in 2010. The New York State Department had 30 days after being served with the judgement and notice of settlement, and according to court records the Department decided not to appeal.

The ruling will have broad implications, especially for larger estates such as that of George Steinbrenner, long-time principal owner of the New York Yankees. His will set aside an undisclosed portion of his $1.1 billion fortune into a QTIP trust for his widow, Joan, who died in December of 2018. It was tasked to Steinbrenner's attorney, Robert Banker, to determine when the trust would pay the estate tax, or to wait until Joan's passing. Based on the court ruling, it looks like Joan Steinbrenner's estate won't pay a QTIP tax at all.

A big question is on what legal grounds the New York State Department of Taxation and Finance could appeal the decision, if it chose to do so. “They could appeal … on the ground that the surrogate did not apply the law correctly to the facts of this case, [but] the facts were undisputed,” the law firm that represented the estate that the opinion was in reference to.

See Joyce Blay, George Steinbrenner’s Estate Gets a Big Tax Break, Financial Advisor, December 26, 2018.

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

Article on A Run for Your Money: Are ABLE Accounts Truly an Innovative, User-Friendly Financial Savings Tool for the Broad Spectrum of Disabled Americans?

Madeleine Laser recently published a Note entitled, A Run for Your Money: Are ABLE Accounts Truly an Innovative, User-Friendly Financial Savings Tool for the Broad Spectrum of Disabled Americans? 34 Touro L. Rev. 789-821 (2018). Provided below is a portion of the introduction of the Note.

There are 8.8 million disabled American wage earners who receive social security disability income benefits. Although these 8.8 million disabled Americans are working, they are constrained to a life savings of no more than two thousand dollars. Disabled Americans, many of whom lobbied for the passage of the Achieving a Better Life Experience (“ABLE”) Act, desire a future where they no longer fear taking a full-time job or promotion. Passage of the ABLE Act, thus, represents more than a new savings tool that shields a disabled person’s assets, but also a growing opportunity for upward socioeconomic mobility and financial stability. Disabled Americans should not fear losing benefits because their benefits are protected in an ABLE account.

Disabled individuals who receive Supplemental Security Income (“SSI”) benefits and Medicaid are legally entitled to have two thousand dollars in savings without being disqualified. Against their better judgment, hard-working disabled individuals constantly spend their money to avoid losing these benefits by surpassing the two thousand dollar savings cap threshold. Disabled individuals are “[shackled] to a life of poverty,” unable to create a financial safety net or prepare for future goals. Recipients of SSI and Medicaid whose disabilities inhibit their ability to earn enough money to pay bills and keep food on their table describe their financial situation as a “constant state of anxiety and fear.” The Social Security Act (“SSA”) strictly limits how a recipient can earn, save, and spend money, which consequently discourages upward economic mobility for fear of losing benefits.