Tuesday, November 14, 2023
He has been married for ten years and together for 15, and he has a trust fund providing a monthly income of $25,000. Despite repeatedly assuring his dedicated doctor spouse that they don't need to work, the man has never disclosed the trust fund. The dilemma revolves around whether to reveal this financial truth, as family members advise against disclosure, but the burden of the secret is becoming challenging.
The columnist suggests that, although the first date may not have been ideal, the man should have disclosed his trust fund once the relationship became serious.
Keeping such secrets can be burdensome over time. The recommendation is to reveal the truth quickly, as delaying any longer may complicate matters further. Anticipated challenges include the spouse questioning what else has been hidden and reflecting on the deception facilitated by apparent disinterest in daily activities. Seeking couples counseling is advised, acknowledging that trust is fundamental to a healthy relationship.
For more information see Kwame Anthony Appiah “I’ve hidden my Trust for 15 years. Do I finally tell my Spouse?”, The New York Times, August 11, 2023.
Special thanks to Naomi Cahn (University of Virginia) for bringing this article to my attention.
Monday, November 13, 2023
Estate planners are advising wealthy individuals to utilize the current high lifetime gift and estate tax exemption of $12.92 million before it potentially decreases to around $7 million by the end of 2025. To do so, individuals are urged to employ sophisticated strategies despite the apprehension that comes with transferring a significant amount of wealth to another person's ownership or control. This includes considering spousal lifetime access trusts (SLATs).
SLATs are irrevocable trusts where an individual sets up a trust for their spouse as the primary beneficiary, with children or grandchildren as beneficiaries after the spouse's passing. This allows the individual to remove assets from their estate while retaining a potential avenue to access the assets in the future through the spouse. SLATs must be funded with assets owned solely by the individual, and they help shield both the assets and future growth from estate taxes. However, challenges arise in the case of divorce, as SLATs are irrevocable, and the trust continues for the benefit of the ex-spouse, with the original creator still responsible for taxes on trust income.
For more information see Karen Hube “What the Wealthy Can Do to Prepare for the Expiration of Today’s High Estate Tax Exemption”, Barrons PENTA, November 7, 2023.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Seymore Goldberg provided information for an upcoming CLE: QTIP Trusts Holding Interests in LLCs and Partnerships (Danger Zone) on Thursday, November 16th. Please find more information below:
Many taxpayers may own partial interests in LLCs or partnerships. Should such interests be the subject of a bequest to a QTIP trust? The instructor recently made a Revenue Ruling request to the IRS regarding this significant QTIP trust tax issue. This request covered in part the following:
- Systemic significant fiduciary income tax compliance issues for trustee may be triggered by such transactions under the trust accounting rules in New York State and eight other jurisdictions. Who would want to be a trustee?
- IRS rules for trust fiduciary income tax returns (Form 1041), QTIP marital deductions and the jurisdiction’s trust accounting rules.
- What if the jurisdiction’s [over 35] trust accounting rules go one way and the IRS rules go the other way? QTIP/conflict of laws issue.
- QTIP marital deduction at risk or not in over 35 jurisdictions.
Additional key topics include:
- Waiver of IRS penalty rules under Secure
- Excise tax rules that apply for first distribution calendar year
- Major IRS statute of limitation changes under Secure 2.0 Act of 2022
- Major IRS penalty changes under Secure 2.0 Act of 2022
- Estate planning and professional liability court case (privity issue)
- Professional liability court case (privity issue)
- IRA beneficiary malpractice court case
- Actual and potential malpractice issues regarding retirement distribution advice. Giving wrong advice or failure to give timely advice (includes systemic issues) in privity and non privity jurisdictions.
- Systemic major non-compliance issues involving IRA trusts and Roth IRAs that you must be made aware of. Consequences of non-compliance can be severe for many.
Friday, October 20, 2023
Edward A. Zelinsky (Yeshiva University - Benjamin N. Cardozo School of Law) recently posted on SSRN his article entitled Situating the Modern Public Trust Doctrine in Trust Law: The Duty of Loyalty and the Case for Bifurcated, De Novo Judicial Review which is scheduled to appear in the Virginia Environmental Law Journal. Here is the abstract of his article:
This article situates the modern public trust doctrine (PTD) in contemporary trust law. Grounding the PTD in trust law leads to two important corollaries. First, the PTD planted in trust law imposes upon government actors and agencies trust law’s fiduciary duty of loyalty. In the context of the PTD, that duty of loyalty runs to the public as the beneficiary of the PTD. Second, faced with plausible claims that this fiduciary duty of loyalty to the public has been violated, courts should apply trust law’s de novo standard of review to those administrative and legislative decisions alleged to impair public trust resources. Such searching review stems from recognition that public trustees of the environment invariably confront conflict between their fiduciary obligation of loyalty to the public and the private interests which seek to capture such trustees and the natural resources they control.
In light of that conflict between public and private interests, when evaluating PTD claims, courts should deploy trust law’s de novo review rather than using one of administrative law’s deferential standards of review. Since public trustees are trustees with trust law’s duty of loyalty to the public, their compliance vel non with that fiduciary duty of loyalty should, as a matter of trust law, be assessed by the courts de novo rather than deferentially in light of the conflicts such trustees invariably confront.
Wednesday, August 30, 2023
Article: Trusts and the Choice of Law: What Role for the Settlor’s Choice and the Place of Administration?
Thomas P. Gallanis (George Mason University, Antonin Scalia Law School) and published an Article titled, Trusts and the Choice of Law: What Role for the Settlor’s Choice and the Place of Administration?, Tulane Law Review, 2023. Provided below is the Abstract:
In modern trust practice, a settlor often seeks to create a trust to be governed by the law of and administered in a jurisdiction that is not the settlor's domicile or residence. The settlor does this by specifying the governing law in the terms of the trust and locating all or part of the trust’s administration in the favorable jurisdiction.
To what extent should a settlor be permitted to use these techniques to select favorable trust law? The question is important because of burgeoning trust practice. Billions of dollars are moving into U.S. states that supply favorable trust law. The question is timely because the American Law Institute is in the process of drafting the Restatement (Third) of Conflict of Laws, and the Uniform Law Commission has appointed a drafting committee to prepare a uniform act on the conflict of laws in trusts and estates.
This Article tackles the central aspects of the question. After analyzing the approaches of the first and second Restatements of Conflict of Laws and of the Uniform Trust Code, the Article proposes a path forward for the new Restatement and the new uniform act. The coordinated drafting of these projects provides an opportunity for the ALI and the ULC to reaffirm the broad latitude - not unlimited, but broad - for a settlor to choose the law governing the trust and, in the absence of such a choice in the terms of the trust, the role of the principal place of administration as a likely indicator of the settlor’s probable intention in many, though not necessarily all, instances.
Ascertaining and honoring the settlor’s intention or probable intention is a core value of U.S. trust law and should be fostered by the corresponding rules on the choice of law.
Friday, August 25, 2023
Richard C. Ausness published an Article titled, Beneficiaries as Trustees: Here’s the State of Things, Quinnipiac Probate Law Journal Vol. 36, 2023. Provided below is the introduction:
It is not unusual for settlors to appoint beneficiaries as trustees. However, there are serious risks with this practice. This Article will examine some of these risks and suggest ways to reduce them. Part II describes why settlors appoint beneficiaries as trustees. Part III identifies some of the cases that have arisen where other trust beneficiaries have charged trustee beneficiaries with breach of fiduciary duties such as the duty of loyalty, impartiality, and prudence, as well as the duty to inform and report. Part IV explores a number of cases which have involved common trust arrangements such as revocable inter vivos trusts, discretionary trusts, support trusts, and marital trusts. Part V describes various drafting options and other measures that might reduce the chances of litigation by other beneficiaries.
Wednesday, July 26, 2023
Charles Mitchell (University College London) recently published a paper titled, Public Trusts, 1750-1850, Faculty of Laws University of London Law Research Paper No. 10/2023. Provided below is an abstract to the paper:
The paper discusses the eighteenth- and nineteenth-century history of English public trusts, meaning trusts of property that was held not for the benefit of any person or group of persons as private individuals, but for public purposes, the accomplishment of which would benefit the community at large. Trusts of this kind were frequently used as a legal form through which money and other property was held and spent on for the purposes of local government. Four types of trust are considered: town trusts, statutory trusts for building and maintaining roads, bridges, docks, harbours, etc, charitable trusts,, and trusts of ‘public money’ owned by borough corporations. Among other matters, the paper considers the nature of 'public trusts' during this period and whether they were thought to be substantially different from ‘private trusts’.
Tuesday, July 18, 2023
Hanoch Dagan (Tel Aviv University) and Irit Samet (King’s College London, The Dickson Poon School of Law) recently published an Article, What’s Wrong with Massively Discretionary Trusts, 138 Law Quarterly Review 629, 2022. Provided below is an abstract:
In this article we offer a theoretical analysis of the massively discretionary trust (MDT) from the perspective of the justice requirements imposed by a liberal conception of the state. We aim to show that conceptual, doctrinal or policy-driven analyses of this legal phenomenon cannot fully account for the profound way in which it undermines the legitimacy criteria of the trust relationship. Building upon our theory about the place of trusts in a liberal property regime, we aim to show why the MDT should not be recognised as a legitimate form of property holding in a liberal society.
Wednesday, June 28, 2023
Raymond C O’Brien (Catholic University of America- Columbus School of Law) recently published an Artcile, Creating a Trust Through Delegation, Quinnipiac Probate Law Journal, Vol. 36 Pp. 1-40, 2023. Provided below is an abstract:
Aging in America has precipitated increasing use of planning for incapacity devices, which include forms creating powers of attorneys (“POAs”). Simple forms may be found online, or they may become part of a sophisticated estate planning portfolio drafted by professionals. Resultingly, to support portability, enforceability, and protection against financial exploitation of vulnerable adults, the National Conference of Commissioners on Uniform State Laws approved the Uniform Power of Attorney Act in 2006 (“UPOAA”), which has been adopted by more than half of United States jurisdictions. One of the Act’s provisions requires an express grant of authority contained within the principal’s POA before an agent designated by the principal may create, amend, revoke, or terminate a trust. As a result, a general grant of authority to an agent is insufficient to permit an agent to create an inter vivos trust, revocable or irrevocable. This component is counterproductive because it lessens the agent’s fiduciary effectiveness, particularly given the flexibility and management advantages that trusts bring to modern estate planning. The rationale for requiring express authorization is that it protects the principal from possible financial exploitation by the agent, a serious and prevalent form of abuse adversely affecting many older Americans. And yet, states and the federal government have enacted various legislative protections, such as mandatory reporting, immunity for reporting, withholding funds when there is reasonable suspicion of financial abuse, increased statutory avenues for elder financial abuse prosecutions, and educational programs for financial officers and enforcement agencies. In addition, there are fiduciary restraints incorporated into the UPOAA and current trust law enacted in all states. With these advancements, it is far more likely today that financial exploitation by agents will be identified and perpetrators punished. This Article argues that provisions in POA statutes, specifically the UPOAA, requiring an express grant of authority before an agent may create an inter vivos trust is violative of public policy and statutes should be amended to permit agents to create, amend, revoke, or terminate a trust under a general grant of authority. The public policy argument is based on the abundant use of inter vivos trusts, the acceleration of reporting and prosecution of reasonable suspicions of financial exploitation, and the unawareness of a significant number of signers of POAs that a general grant of authority will not authorize their agents to take advantage of the substantial benefits associated with trusts and estate planning.
Saturday, June 24, 2023
Adam S. Hofri-Winogradow (Peter A. Allard School of Law, the University of British Columbia) recently published an Article, The Irreducible Cores of Trustee Oligations, Law Quarterly Review, 2023. Provided below is an abstract of the Article:
The law of trustees’ obligations is built around an enduring contradiction. On the one hand, trustees are subject to a heavy burden of duties. Though breach of those duties does not always lead to compensatory liability, trustees are also subject to a heavy burden of liabilities. On the other hand, drafters of trust instruments often exclude large parts of either or both burdens. In other cases, trustees’ duties are not excluded but undermined, as by subjecting trustees to the directions of a non-fiduciary protector. The law of many common law jurisdictions accepts much of this practice of exclusion and undermining, rendering much of the two burdens default law. Twenty-five years ago, leading trust jurists started referring to the mandatory elements of trusteeship, of trustee obligations or of trust law as an “irreducible core”. This article focuses on the irreducible core of trustee obligations, leaving aside other parts of the law of trusts. The topic encapsulates a dilemma fundamental to the law of trusts: how much of trustees’ burdens, hereinafter discussed as one composite burden, should be subject to contract-style tailoring and elimination, and how much of that burden should be inescapable? The article proposes an answer to that dilemma. I argue that attempts to define a single mandatory core, applicable to trustees of all express, non-charitable trusts except those statutorily subjected to special trust regimes, tend to be unstable. This instability is a result of the large differences between the many contexts in which trusts are used. The law governing trustees of express non-charitable trusts tends to coalesce around several cores rather than one, each applicable to a different context of trust practice. Concluding that the multiple cores trend is desirable, I propose a blueprint for its further development, including irreducible cores for three trust types: (i) settlor-controlled family trusts; (ii) non-settlor-controlled family trusts using remunerated trustees, some or all beneficiaries of which are minors or otherwise vulnerable; and (iii) commercial trusts.