Wills, Trusts & Estates Prof Blog

Is It OK to Rule From the Grave?

Imposing conditions on your loved ones during the estate planning process can be helpful, so long as they are reasonable. Overly burdensome conditions can lead to disastrous results, so conditions need to be clear, measurable, and practical to help protect estate plans and beneficiaries. 

Conditions, such as putting an age requirement on a child’s ability to assume the role of executor, can be practical. Representatives of estates must be legal adults, and measuring age is easy to do. However, when requirements become more complex, like requiring college attendance and imposing GPA requirements, measuring the outcome can be difficult. What if, instead of entering a traditional university, the child enters a trade school or military service? Or perhaps they choose a major where earning high marks is difficult to do? 

Other conditions, like implementing the HEMS standard (health, education, maintenance, and support) are common and considered relatively clear and measurable. Conditions like, distributions being made upon the beneficiary becoming a parent are too complex. What if they become a step-parent, or are unable to have children? When conditions are overly limiting it can be settling the estate too complicated and time-consuming, and lead to resentment on behalf of family members.

For more information see Allison L. Lee “Is it OK to Rule From the Grave?”, Kiplinger, November 4, 2022

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

Article: Trust Law's Public Policy Doctrine: Major Policy Fault Lines, Aggressive Home Rule Legislation, and Implications for Conflicts Reform

Reid K. Weisbord (Professor of Law and Norma L. Shapiro Scholar, Rutgers Law School) recently published an article, Trust Law's Public Policy Doctrine: Major Policy Fault Lines, Aggressive Home Rule Legislation, and Implications for Conflicts Reform, Tulane Law Review, Forthcoming. Provided below is an abstract to the paper:

Trust law is highly deferential to settlor intent, however, under the public policy doctrine, any trust or trust provision contrary to public policy is unenforceable. Echoing that doctrine is a conflict of laws rule providing that a settlor’s express choice-of-law designation is enforceable if the trust assets are movable, the designated state has “a substantial relation to the trust,” and “the application of its law does not violate a strong public policy of the state with which, as to the matter at issue, the trust has its most significant relationship.” The conflict of laws rule sets aside choice-of-law designations only when they violate a strong public policy, but trust law’s public policy constraints often inform the determination of conflict of laws disputes. Such disputes have become increasingly common as state laws have diverged on sharply disputed issues such as the validity of self-settled spendthrift trusts, the eligibility of trust settlors and beneficiaries for public benefits, and the enforceability of trustee exculpation provisions.

A recent wave of trust legislation reveals an especially muscular approach by some legislatures seeking to fortify state public policy under local trust law. In one notable trend, a few states have enacted legislation that seeks to inoculate local trusts from invalidation elsewhere as contrary to the public policy of another state or federal law. In 2021, for instance, a South Dakota statute declared that local domestic asset protection trusts were immune from invalidation under any contrary public policy of another state and that courts were prohibited from enforcing foreign judgments against property held in a local trust unless and until a South Dakota state court ruled on the matter. Elsewhere, however, courts have succeeded in pushing back. In 2018, for example, the Alaska Supreme Court held unconstitutional a state statute that granted Alaska courts exclusive jurisdiction over out-of-state disputes arising from local self-settled asset protection trusts. Likewise, in 2021, a Minnesota appellate court struck down a state statute that denied Medicaid benefits to an irrevocable trust settlor who had fully complied with federal eligibility requirements.

This Article contributes to the conflict of laws literature by examining recent developments in trust law’s public policy doctrine. The Article focuses on three major fault lines of policy divergence: (1) the validity of self-settled asset protection trusts; (2) the use of trusts by applicants for government assistance; and (3) the enforceability of trustee exculpation provisions. The Article concludes by discussing implications for state legislatures, courts, trustees, and trust settlors.

Study of Wealthy Americans Highlights Stark Contrasts Between Generations

 Earlier this year, Bank of America conducted a Private Bank Study of Wealthy Americans and found significant differences amongst generations around investing, spending, philanthropy, and wealth planning. This is significant because it is expected that $73 trillion will be passed on to the next generation in the next decade-plus, with another $11 trillion given to charity. 

The study surveyed over 1,000 high-net-worth individuals and found that three-quarters of younger people are not as confident in returns on traditional stocks and bonds as older generations, with younger generations more interested in sustainable investments that they hope can make a positive impact on the world. 73% of millennials have invested in sustainable investments compared to only 21% of older respondents.

When it comes to philanthropy, only half of all donors support the same causes as their parents, many seeking to find their own philanthropic identity. Another key finding was that only half of parents feel that their children are well prepared to inherit their wealth. Estate planning is a critical client need, with advisors central to addressing the needs of clients with well-executed plans that will address the communication and family dynamics that the older generations are concerned about.

For more information see Joe Dziemianowicz “Study of Wealth Americans Highlights Stark Contrasts Between Generations”, Barron’s PENTA, October 11, 2022.

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

Article: Modern Post-mortem Estate Planning for Non-citizen Spouses: Why Qualified Domestic Trusts are a Risky Proposition

Fabio Ambrosio (Central Washington University) recently published an article entitled, Modern Post-mortem Estate Planning for Non-citizen Spouses: Why Qualified Domestic Trusts are a Risky Proposition, Journal of Financial Planning, 2022. Provided below is the abstract to the article:

Trusts are an essential part of estate planning. These legal ‘creatures’ often mystify laypersons as obscure vehicles offering tax saving opportunities to the rich. While there is often some truth to this, administering certain types of trusts can be a matter of enormous complexity, even for the most qualified advisors, and careless planning can lead to catastrophic consequences. The Qualified Domestic Trust (QDOT) is perhaps the most complex of these estate planning vehicles. Qualified Domestic Trusts are born by the interplay of (a) the distinction between income and wealth and (b) the jurisdictional limitations on the reach of U.S. tax laws on the wealth of noncitizens.

Article: And the Heirs of His Trust Corpus: How the Fee Tail and Historical Limitations on Perpetuities Can Inform the Law of Perpetual Trusts

Liam Cronan (Boston University School of Law) recently published an article entitled, And the Heirs of His Trust Corpus: How the Fee Tail and Historical Limitations on Perpetuities Can Inform the Law of Perpetual Trusts, Boston University Law Review, Forthcoming. Provided below is the abstract to the article:

The fee tail, common recoveries to convert a fee tail to fee simple, and strict settlements to preserve family control of land are today regarded, if at all, as relics of legal history. Yet, these long obsolete facets of the common law demonstrate earlier solutions to a problem that is again posed today. Trust arrangements to perpetuate inherited wealth within lines of descent, caused in part by the abolition of the Rule Against Perpetuities in many states, are again posing problems for the larger society. These perpetual (or “dynasty”) trusts, trusts with no fixed time limit that can avoid tax liability in perpetuity, are a rapidly growing yet vastly underreported problem for trust law and tax law that affect broader societal concerns over increasing wealth inequality. The fee tail was the earliest example of a perpetuity, and as such, it provoked a series of judicial and legislative reactions against what were viewed as the pernicious effects of perpetuities. The efforts of judges and legislatures are again needed to prevent these arrangements from lasting indefinitely, solution to this problem, as this Note explains, is in broad strokes the same as that in our earlier legal history.

Inspired by the release of the “Pandora Papers” in October 2021, this Note aims to offer a comparison between historic limitations on perpetual intergenerational control over familial wealth and modern applications of judicial limitations to perpetual trusts. This Note looks to combat the problem of perpetual trusts by connecting the long history of judicial limitations on perpetuities to two modern solutions: (1) a proposed model statute and (2) renewed methods of interpreting existing trust statutes through the examples of South Dakota, Nevada, Delaware, and Tennessee, states that commonly harbor perpetual trust. This historical lens will then inform an understanding both of perpetual trust’s present issues and the potential solutions to the problems that perpetual trusts propose through the modification of state statutes or renovated interpretations of existing trust law. Once again, it is for courts or legislatures to curtail the worst effects of unreasonably long trust duration through better doctrines on the modification and termination of trusts.

 

Article: The Restatements of Trust – Revisited

Naomi Cahn (University of Virginia School of Law), Deborah S. Gordon (Drexel University Thomas R. Kline School of Law), Allison Anna Tait (University of Richmond School of Law) recently published an article entitled, The Restatement of Trust— Revisited, The ALI at 100: Essays on Its Centennial (Andrew S. Gold & Robert W. Gordon, eds., 2023 forthcoming). Provided below is the abstract to the paper:

As part of a volume commemorating the American Law Institute on its centennial, this Essay reflects on the Restatement of Trusts, which was one of the first of the ALI’s projects. The Restatement of Trusts, along with its two successors, has profoundly influenced both the common law and statutes in the field. As this chapter traces, the three trust Restatements reflect the development of the “modern trust,” whether private or charitable, which holds a variety of financial interests just as they reflect economic, social, and cultural changes that have occurred over the last century.

After providing a brief history of the trust Restatements, this chapter then turns to trace three throughlines: first, it threads together how the three Restatements address the question of shifting social and legal norms, including how diverse populations across the wealth spectrum engage with wealth transfer through trusts; second, the chapter focuses on the “public policy” provision in each of the three trust Restatements and tracks that provision’s focus on gender roles, marriage, religion, and “detriment to community”; third, it traces provisions relating to trustees’ fiduciary responsibilities to beneficiaries, including decisions about distributions and investments. As this chapter celebrates the positive impact of the Restatements of Trusts on the development of trust law, the chapter also provides suggestions for a Restatement (Fourth) of Trusts that, as has been true of the previous Restatements, would reflect contemporary developments in trust law itself and in society. In so doing, this chapter also steps back to provide a tempered critique of the role of trusts in perpetuating inequality, albeit with an understanding that the goal of the Restatement is not to transform the law but rather to reflect its development.

Celebrity Estate Planning: Misfires of the Rich and Famous

Celebrities are not immune to the pitfalls of having outdated or nonexistent estate plans, and even if careful estate planning has taken place, changes in family circumstances or tax laws can have negative impacts. 

This article takes a look at some famous mistakes made by famous people, including over simplistic wills (Jim Morrison), after-born children (Philip Seymore Hoffman), domicile (Heath Ledger), second families and decanting (David Bowie), and oral promises (Anna Nicole Smith.)

Ultimately, what all of these mistakes have in common is that they are preventable. Simple updates or revisions can make substantial differences for beneficiaries and it is important to take time to protect love ones with complete and updated estate plans.

For more information see Jessica Galligan Goldsmith, Shaina S. Kamen, Christiana M. Lazo, David J. Posner, and Bruce D. Steiner “Celebrity Estate Planning: Misfires of the Rich and Famous” ABA Probate & Property Magazine, September/October 2022.

Article: An Historical and Empirical Analysis of the Cy-Près Doctrine

CJ Ryan (Associate Professor of Law at the University of Louisville Brandeis School of Law) recently published an article entitled, An Historical and Empirical Analysis of the Cy-Près Doctrine, ACTEC L.J., 2022. Provided below is an abstract of the Article:

Cy près is a pivotal doctrine in estate law and indeed American jurisprudence. It places courts in the shoes of settlors of charitable trusts to discern not only their original intent but also affords the possibility of continuing the material purpose for which settlors created enduring legacies of philanthropy benefitting society. For this reason, it may well be that no other legal doctrine is as closely tied to the interests of the individual and the collective as cy près. And my first-of-its kind study puts the cy-près doctrine front and center, while providing three major contributions to the field.

First, through deliberative historical analysis, I offer an in-depth look at the types of cases American courts have heard involving the use of cy près. This historical categorization and explication is itself unique and provides significant insight into the controversies that allowed the doctrine to evolve. Second, the application of empirical methods to examine the doctrine is groundbreaking. By holistically examining the data I collected, I have been able to discern three major themes. The passage of time yields a gradual but greater adoption of the use of the cy-près doctrine. The presence of reversionary, gift-over, or private interests renders the use of the cy-près doctrine less practicable. And finally, courts are overwhelmingly more likely to apply cy près in cases involving public charitable trusts, educational purpose trusts, and medical purpose trusts, even when controlling for other independent variables and typologies of charitable trusts. Last, fifty-state surveys are commonplace; yet, none exists for the doctrine of cy près. I was able to assemble such a survey that not only assisted me in conducting this research but will undoubtedly aid other researchers for years to come, which I have addended to this Article in the Appendix.

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.

Billionaire Dynasty of Only Men Turns to Women to Handle Fortune

For 345, the Grosvenor dynasty has maintained their $11.6 billion fortune within their male lineage. Now, women are now playing an increasing role in managing the family’s London-based namesake investment firm.

The Grosvenor’s have holdings in urban property, country estates, and agricultural technology and have appointed Henrietta Gourlay to manage most of the external funds, Cindy MacMillan as Vice President of the North American investment team, and Emily Petrila as Vice President for legal counsel in North America. The Grosvenor’s people directed said in a statement, “We are focused on building a diverse and inclusive workforce which reflects the communities in which we operate… Part of this approach means increasing the number of women at the senior end of our organisation.”

The Grosvenor lineage can be traced back nearly 1,000 years, and the main source of wealth can be attributed to a 17th century marriage when Sir Thomas Grosvenor received a dowry containing 121 hectares of swamp and orchard from his bride’s family. She was 12 years old at the time of the marriage. The fortune is structured to operate as a male primogeniture, giving sons the ability to displace daughters in the line of succession. In the 1950s, the Grosvenor family placed their main assets in a series of trusts to protect the estate from spendthrift heirs, divorce and other threats, leaving the family to receive the benefits but having no ‘absolute right’ to the assets. 

For more information:

See Benjamin Stupples “Billionaire Dynasty of Only Men Turns to Women to Handle Fortune” Bloomberg Wealth, August 1, 2022.

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