Wills, Trusts & Estates Prof Blog

Article on A "Mere Expectancy?" What Rights do Beneficiaries of a Revocable Trust have Prior to the Death of the Settlor?

Richard C. Ausness recently published an Article entitled, A "Mere Expectancy?" What Rights do Beneficiaries of a Revocable Trust have Prior to the Death of the Settlor?, Quinnipiac Probate L.J., Vol. 32 Iss. 4 (2019). Provided below is the introduction to the Article.

Revocable trusts became a popular form of a will substitute in the 1960s and remain so to do this day. If the trust is funded, the settlor typically retains the right to receive income from the trust, the right to invade the trust principal, and the right to modify the terms of the trust. In addition, the settlor may serve as trustee or may appoint a third-party trustee. At the settlor's death, the trust assets, which may also include property transferred to the trust from the settlor's probate estate by means of a pour-over provision in the will, will be distributed to the trust's remainder beneficiaries in accordance with the terms of the trust.

Because the settlor usually retains an absolute right to revoke or modify the terms of a revocable trust at any time, courts generally refuse to afford remainder beneficiaries any rights in the trust while the settlor is alive. Instead, courts have ruled that remainder beneficiaries have no standing to seek information about the trust or challenge the trustee's actions, regardless of whether the trustee is the settlor or a third-party. However, the situation becomes somewhat murky once the settlor dies and the interests of the remainder beneficiaries are no longer "mere expectancies."

Part II briefly examines the nature and origin of the revocable trust. Part III considers how courts treats objections by remainder beneficiaries to actions taken by the settlor while serving as trustee. Part IV surveys attempts by remainder beneficiaries to question whether the settlor lacks sufficient mental capacity to revoke or modify the trust or whether such actions are the product of undue influence. Part V concerns the ability of remainder beneficiaries to contest the actions of a third-party trustee while the settlor is alive.

Part VI deals with the problem of whether remainder beneficiaries should have the power after the settlor's death to challenge actions taken by the settlor while alive on the theory that the settlor was mentally incompetent or was subject to undue influence. Part VII looks at requests for information or an accounting from a third-party trustee made after the settlor's death. Part VIII focuses on the controversial and perplexing issue of whether a remainder beneficiary should be allowed to sue the third-party trustee of a revocable trust after the settlor's death for wrongdoing allegedly committed during the settlor's lifetime. Part IX evaluates both doctrinal and normative perspectives on the questions of remainder beneficiary rights after the death of the testator. Finally, Part X offers a solution to the conflict of authority on this issue.

Two of Pat Bowlen’s Daughters Take Legal Action to Challenge Ownership Trust

The 2009 trust created by Pat Bowlen to ensure a succession plan for the ownership of his professional football franchise, the Denver Broncos, is now being attacked in court. Two of his daughters, Beth Bowlen Wallace and Amie Klemmer, are claiming the validity of the Patrick D. Bowlen Trust on the grounds that their father lacked the capacity to form the trust and that he was under undue influence at the time of its creation.

Essentially, the trustees choose one of Bowlen's 7 children to control and run the team. It is widely believed that 29-year-old Brittany Bowlen unofficially has been selected by the trustees, and that it’s just a matter of time before the selection occurs. Previously, the court had dismissed an action by Bowlen's brother brother - acting on behalf of Wallace and Klemmer - that questioned the authority of the three trustees who have managed the team since 2013.

Wallace and Klemmer claim that their father was first diagnosed with Alzheimer's in 2006, three years before the creation of the trust, and that he no longer had the capacity to do so. The stakes are high for the daughters, though; they could end up being completely disinherited by fighting the trust. So they are putting their portions of their father's estate on the line in order to challenge the current structure for determining control of the Broncos.

See Mike Florio, Two of Pat Bowlen’s Daughters Take Legal Action to Challenge Ownership Trust, Pro Football Talk-NBC Sports, September 13, 2019.

Special thanks to Jim Hartnett, Jr. (Dallas, Texas Probate Attorney) for bringing this article to my attention.

Article on Janus as a Client: Ethical Obligations When Your Client Plays Two Roles in One Fiduciary Estates

Karen E. Foxx & Philip N. Jones recently published an entitled, Article on Janus as a Client: Ethical Obligations When Your Client Plays Two Roles in One Fiduciary Estates, ACTEC L.J., Vol. 44 No. 3 (2019). Provided below is an abstract of the Article.

Is it possible for an attorney to have a conflict of interest when the attorney represents a trustee who is also a beneficiary of the trust? Is that situation similar to having two clients? What if the trustee is not only a beneficiary, but also a claimant against the trust? Since the trustee has three roles to play, is that situation similar to the attorney having three clients? The issue presented by these potential conflicts was one of the most vexing for the drafters of the Fifth Edition of the ACTEC Commentaries. The range of possible approaches goes from a requirement that a separate lawyer is needed for each role to a view that a client with multiple roles can rely on one lawyer. This article examines the various court and ethics opinions, considers the arguments for the different approaches, and recommends best practices for attorneys when their clients have such conflicts.

Estate Planning and Millennials

No matter the debate among other generations, millennials are legal adults. As such, they need all the same documents any other adult would need, including a will, a durable power of attorney and a living will. A Durable Power of Attorney names an agent to act on your behalf with respect to financial and other decisions in the event of incapacitation, which could happen to anyone, no matter their age. Depending on their personal circumstances, they may even need more intensive planning.

If a millennial's only assets are joint owned or already have designated beneficiaries (such as a bank account), there may be no need for a will; of course, always confer with an estate planning attorney. 

As the most digitalized generation that was essentially raised online, a millennial may want extra care with their digital assets. Maybe they want their Facebook page memorialized or a financially successful blog continued or even photos that have no physical medium to be distributed. A consice list of user names and passwords should be compiled along with instructions for the corresponding account, or utilize a reputable service to do so.

Millennials commonly adopt pets before (or even instead of) having children, so putting together a pet trust may be necessary. Without one, a cherished fur baby may end up with a caregiver that does not provide for the pet as the owner would have intended. 

See Rebecca Wrock, Estate Planning and Millennials, Varnumlaw, September 9, 2019.

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

Article on Trustees' Rights of Indemnity, Insolvency and Statutory Distributions to Preferred Creditors

Mark Leeming recently published an Article entitled, Trustees' Rights of Indemnity, Insolvency and Statutory Distributions to Preferred Creditors, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article.

What is the nature of a trustee's right of indemnity, and, in particular, if the trustee of a trading trust is wound up, how does it interact with the Australian statutory scheme for distribution to creditors? Two Australian intermediate courts delivered substantial judgments addressing these questions in 2018: Jones v Matrix Partners Pty Ltd [2018] FCAFC 40 and Commonwealth of Australia v Byrnes [2018] VSCA 41. This casenote summarises those decisions.

Article on Conceptions of the Fiduciary in Trust Law

Tobias Barkley recently published an Article entitled, Conceptions of the Fiduciary in Trust Law, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Statutory reform of trust law in New Zealand is taking the groundbreaking step of defining the express trust relationship. Part of the definition is that trusts are fiduciary relationships. As interpretation of the statute will take into account common law principles, this reform provides an opportunity to reflect on what fiduciary means in trust law. The article identifies five distinct conceptions of the fiduciary in trust cases. While all five are concerned with restraint on the trustees’ discretion, different trustees can be restrained by different standards of behaviour. The identified fiduciary conceptions range from the classical fiduciary, who must solely and exclusively act for the benefit of others, to the honest fiduciary, who is free to honestly benefit him or herself. The range of meaning in the common law will complicate interpretation of ‘fiduciary’ in the New Zealand legislation.

Estate Planning in Tennessee: Could You Benefit From a Community Property Trust?

A common goal of estate planning is avoiding the federal estate tax as well as a state estate tax, if applicable. Historically, the federal estate tax was set at a very low level, consequently making proper  asset protection a necessity. But now the federal estate tax exemption amount is set at $11.4 million for an individual and $22.8 million for a married couple, and since 2016 Tennessee no longer has an inheritance tax. However, there are other tax oriented goals of proper estate planning.

Tennessee is one of the 41 states that are not community property states. Instead, it is a common law state. In 2010, the Tennessee legislature enacted the Tennessee Community Property Trust Act which allows assets in the trust to be treated as if they were in a community property state. Upon the death of the first spouse, both spouses’ interests receive a basis increase to the current fair market value.

If a lower tax bill is not appealing enough, additional advantages of a community property trust include:

• It is revocable so assets can be pulled out of the trust at any time.
• At both the first and second death, trust assets avoid probate and any associated costs while keeping all financial information private.
• The trust can hold all types of assets including developed or undeveloped real estate, business interests, stocks, bonds, mutual funds, and many other investments.
• A community property trust can protect an asset from becoming a marital asset in a second (or third, etc.) marriage.

See Cliff Taylor, Estate Planning in Tennessee: Could You Benefit From a Community Property Trust?, Biz Journal, September 4, 2019.

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

Article on Recent Cases: Intestacy, Wills, Probate, and Trusts

Gerry W. Beyer recently published an Article entitled, Recent Cases: Intestacy, Wills, Probate, and Trusts, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

This article discusses judicial developments (mid-2018 to mid-2019) 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 appeals in the past, probate judges can reduce the likelihood of appeals and their success and estate planners can reduce the likelihood of the same situations arising with their clients.

Breaking the Silence: Dealing with Mental Health Issues in Estate Planning

Estate planners, in their role in advising such an intimate aspect of their clients' lives, deal with a vast array of diverse individuals. Many of those clients may be affected by a family member with a mental illness or in fact be affect by a mental illness themselves.

Statistics show that more people are touched by mental illness than previously thought, as many as one in five Canadians. The taboos of the past dictating silence on the issue should be shoved aside so that there can be an honest and open discussion between all involved. Mental illnesses and their affects on a child's or grandchild's ability to provide for themselves should be considered in a thorough estate plan. Protection can be accomplished through a trust with instructions to the trustee to pay income and capital for their child's benefit, but also the ability to terminate the trust should the protection of a trust not be necessary when their child reaches a more mature age. 

As mental illnesses a highlighted more in the public eye and not seen as the stigma that they once were, more people will understand their loved ones as well as their needs.

See Margaret O'Sullivan, Breaking the Silence: Dealing with Mental Health Issues in Estate Planning, O'Sullivan Law, August 30, 2019.

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

The Legal Dangers of Living Together

According to the U.S. Census Bureau, the number of unmarried couples who 50 and over shot up 75% between 2007 and 2016. For many it is because they have already experienced one difficult divorce and are nervous to entangle themselves and their possessions again. But simply living together can end up being complex because estate planning laws were written to favor married couples.

If one partner has a medical emergency and has not executed a health care power of attorney, the other partner cannot make any decisions for them. They would be considered "legal strangers." If they were married, however, not having the document would not hinder the healthy partner from making appropriate choices. Unmarried couples also need to get signed HIPAA releases so medical information can be released to them. Death of one partner can also create more woes. Without the proper legal documents, the surviving partner won’t be entitled to make decisions regarding the donation of the deceased’s organs or arrange for the person’s burial or cremation.

When there is a financial imbalance and one partner has promised to take care of the other, with no trust or will in place can cause serious problems for an unmarried couple. If the wealthier one dies intestate, their assets will be distributed according to the intestacy laws of their state and an unmarried partner is not recognized as an heir. On the other hand, if they were married and died intestate in a community property state, the surviving spouse is automatically entitled to inherit as much as half the value of the deceased’s assets.

See Brad Wiewel, The Legal Dangers of Living Together, Next Avenue, August 28, 2019.

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