Wills, Trusts & Estates Prof Blog

CLE on The Probate Process from Start to Finish

The National Business Institute is holding a conference entitled, The Probate Process from Start to Finish, on Wednesday, June 5, 2019 from 8:30 AM - 4:40 PM at the Hilton Garden Inn San Antonio Airport in San Antonio, Texas. Provided below is a description of the event.

Program Description

Handling Probate from Initial Notices through the Estate Closing

This "a through z" guide to probate is designed to take you from the first days of the estate timeline through all the steps of marshaling and valuing estate assets, locating and paying the creditors, paying the beneficiaries, and laying the estate to rest. You will receive the latest updates on the probate court procedure and tax laws, practical guidance from experienced probate attorneys on using spousal elective share and resolving estate disputes, and sample forms and checklists to speed up the administration process. Build a solid foundation for your probate practice - register today!

• Learn the procedure, rules and practical steps to effectively administer a probate.
• Determine what form of administration is appropriate for a specific probate case.
• Clarify the order of inheritance for an estate when there is no will.
• Locate assets and obtain ownership documents more easily with a list of local and online resources.
• Get a complete view of the sequence of events that must happen before the estate can be closed.
• Identify common actions that trigger malpractice liability and get tips for staying in the clear.
• Get practical advice for honoring or contesting all claims against the estate.
• Find new ways to resolve liquidity issues that delay estate closing and final distributions and payments.
• Learn what common closing mistakes can allow the estate to be re-opened, and how to avoid them.

Who Should Attend

This basic level seminar is designed for professionals who want to be more effective in handling the probate process, including:

• Attorneys
• Paralegals
• CPAs and Accountants
• Financial Planners and Wealth Managers
• Tax Professionals
• Trust Officers

Course Content

• Initial Filing in Probate Court and Estate Timeline
• Law of Intestate Succession
• Inventory and Appraisement
• Probate Property vs. Non-Probate Assets
• Handling Claims Against the Estate
• Tax Reporting and Post-Mortem Tax Matters
• Ethics
• Sale of Property and Distributions
• Final Accounting and Closing the Estate
• Probate Disputes and Litigation

Article on Boilerplate No Contest Clauses

David Horton & Reid K. Weisbord recently published an Article entitled, Boilerplate No Contest Clauses, Wills, Trusts & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Testators sometimes use "no contest clauses": terms that disinherit anyone who files litigation against the estate. This invited contribution to Law and Contemporary Problems’ special issue on The Butterfly Effect in Boilerplate Contract Interpretation examines whether no contest clauses are a symptom of a larger pathology: attorneys relying on standardized terms without ascertaining the testator’s informed preferences.

We flagged this overarching problem in a previous paper, Boilerplate and Default Rules in Wills Law: An Empirical Analysis. In that piece, we studied 230 wills from Sussex County, New Jersey, and discovered that they were riddled with stock terms that sounded authoritative, but made little sense in context. Alarmingly, this language often over-rode majoritarian default rules (principles that try to fill gaps in a will with a result that dovetails with most testators’ wishes). Thus, we urged courts and lawmakers to reinforce certain background principles by making them “sticky” (harder to draft around).

This Article builds on this foundation by reviewing no contest clauses in 457 wills that were probated in Alameda County, California in the late 2000s. We show that testators and their lawyers overuse no contest provisions. Indeed, these terms appear in nearly 70% of the wills in our sample, including many estates in which there is no realistic possibility of discord. Thus, we conclude that some no contest provisions are intent-thwarting boilerplate.

We then offer evidence that sticky default rules can help combat this problem. In 1994, the California Supreme Court decided Burch v. George, which interpreted a no contest clause expansively. In 2001, the state legislature responded to concerns that testators did not appreciate the capaciousness of no contest clauses under Burch by passing Probate Code section 21305. This statute declares that certain types of lawsuits (such as creditor’s claims) and instruments (like codicils) do not trigger contest penalties unless the testator explicitly directs otherwise. This choice architecture makes section 21305 a sticky default: it “nudges” testators toward accepting a favorable background principle by increasing the cost and effort required to opt out. The wills in our sample reveal that the statute may also have made no contest clauses more visible to testators and attorneys. Indeed, after 2001, the following statistically significant changes occurred: (1) fewer testators included a no contest clause, (2) more wills featured a custom-made no contest provision, and (3) even controlling for other variables through a logit regression analysis, odds of finding a seemingly gratuitous no contest terms declined. These findings support our claim that sticky defaults can serve as an antidote to the careless use of boilerplate in wills.

Note on No Good Deed Goes Unpunished: How the New Hampshire Probate Court Has Strengthened the Power of the Attorney General in Charitable Trust Suits

Angelina M. Spilios, recently published a Note entitled, No Good Deed Goes Unpunished: How the New Hampshire Probate Court Has Strengthened the Power of the Attorney General in Charitable Trust Suits, 17 U.N.H. L. Rev. 379-408 (2019). Provided below is an abstract of the Note.

As Americans increasingly use estate planning tools to provide for their favorite charities, the charitable trust is an important instrument that fits uniquely into general trust law. While charitable trusts are similar to private trusts to a great extent, there are also some critical differences between the two vehicles, especially regarding their enforcement. Specifically, state attorneys general play a special role in the enforcement of charitable trusts. This Note examines this special role of the state attorney general—namely, how trustees interact with the attorney general, arguments for why the role of the attorney general needs to be reformed or eliminated, and arguments in support of letting the attorney general maintain his or her power in these charitable trust cases.

After considering the historical background on charitable trusts, this Note analyzes a recent New Hampshire case, In re Nashua Center for the Arts, as an example of how the New Hampshire Probate Court affirmed the power of the state Attorney General in this charitable trust setting. In that case, several groups of concerned citizens tried to intervene when the trust for Nashua Center for the Arts, part of the Edith Carter estate, announced it would relocate its funds to the Currier Museum of Art in Manchester, New Hampshire. The court denied their motions to intervene because only the state Attorney General has the power to represent them—the parties did not have standing to intervene on their own. The Note then explores other New Hampshire cases, Massachusetts cases, and legal disputes in other states to provide additional perspectives.

This Note concludes that while the court’s decision in In re Nashua Center for the Arts initially seems like a harsh injustice for the nonprofits in Nashua that felt entitled to make use of the funds from Edith Carter’s estate, the court correctly applied the existing law. The outcome of the case should remind nonprofits and citizens in New Hampshire that, while the state has held itself out as one of the most progressive states for trust law, the significant powers held by the state Attorney General will not be limited any time soon.

CLE on Estate Planning: New Laws That Make Old Tools Obsolete

The National Business Institute is holding a teleconference entitled, Estate Planning: New Laws That Make Old Tools Obsolete, on Friday, June 7, 2019, from 10:00 AM to 11:30 AM Central. Provided below is a description of the event.

Program Description

Stay on the Cutting Edge of Your Practice

This timely update will review the latest changes in the rules and will offer new tools to adapt to the new regulatory environment. Make certain your clients get the most up-to-date representation - register today!

• Get an incisive summary of the tax changes and their implications for existing planning tools.
• Learn which deductions remain and how to obtain them.
• Identify planning approaches that no longer help your clients.
• Gain practical pointers for fixing old trusts.

Who Should Attend

This legal update is designed for attorneys. It will also benefit accountants and CPAs, trust and tax professionals, and paralegals.

Course Content

• Leveraging and Reporting the Step Up in Basis (Recent IRS Guidance)
• QPRT Replacements
• Obsolete Small-to-Medium Size Estate Tools and How to Update Them
• The Sky High Estate/Gift/GST Tax Exemption and the New Approaches it Dictates
• Old Large Estate Techniques That No Longer Work and What to Replace Them With
• Charitable Giving after TCJA
• Using the QBI Deduction: New Opportunities
• Fixing Other Old Trusts
• What if? . . . How the Potential Clawback of the New Rules Affects Client Advice

CLE on The LLC Charging Order - The Quiet Shield of LLC Asset Protection

The National Business Institute is holding a webinar entitled, The LLC Charging Order - The Quiet Shield of LLC Asset Protection, on Tuesday, May 21, 2019, from 1:00 PM - 4:15 PM Central. Provided below is a description of the event.

Program Description

Protect LLC Ownership and Management

Your client's LLC ownership is an asset. Do you know how to protect that asset should your client get sued for something unrelated to the business? Can you safeguard your client's future by putting in place provisions that effectively control management rights? Our experienced faculty will discuss how to properly use LLC charging orders and pick-your-partner provisions so you can protect members' ownership interests. Register today!

• What is an LLC charging order and what does it do? Find out!
• Review key charging order provisions and identify if they apply to single-member LLCs.
• Learn about charging order benefits and protections, like ownership integrity and management control.
• Identify key charging order limitations.
• Learn about LLC responses to charging orders.

Who Should Attend

This essential course is designed for attorneys. It may also benefit accountants and presidents/vice presidents.

Course Content

• What is an LLC Charging Order and What Does it Do?
• Charging Order Limitations
• The 3 Types of Charging Order States in Detail
• Charging Order Benefits
• Using Charging Order Laws, Rules and Regulations to Your Advantage
• Charging Order Protection
• Creditor Responses
• LLC Responses to Charging Orders

Article on Essay Response to 'Asymmetries in the Generation and Transmission of Wealth'

Reid K. Weisbord recently published an Article entitled, Essay Response to 'Asymmetries in the Generation and Transmission of Wealth', Elder Law eJournal (2018). Provided below is an abstract of the Article.

What role should wealth transfer law play in reducing economic inequality? In “Asymmetries in the Generation and Transmission of Wealth,” Professor Felix Chang proposes thoughtful reforms to reduce economic inequality by altering the rules of wealth transmission. The current state of wealth inequality in the U.S. may, indeed, justify regulatory intervention, but this is a complex, subjective question. Consider, for example, a recent social policy experiment in which Yale Law School students self-identified as politically progressive but exhibited self-interested distribution preferences that favored efficiency over equality. Nonetheless, objective economic indicators published by French economist Thomas Piketty show that wealth inequality in the U.S. has, in fact, increased in recent years. That trend lends support for Chang’s normative claim of asymmetry between the regulation of wealth generation and transmission. In response to Chang’s call for redistributive reforms, this Essay proposes repackaging the federal wealth transfer tax structure and applying it to a postmortem system of “means testing” for federal entitlements, such as Social Security and Medicare. This system would recapture federal entitlement benefits from wealthy decedent estates, but to protect the vested interests of aging current beneficiaries, postmortem means testing would have to be phased-in gradually by exempting anyone currently over the age of fifty.

Has Granny Signed a Pre-Nup?

The number of people getting married aged 65 and over rose by 46% between 2004 and 2004 according to the latest Office for National Statistics marriage data. During that same time period, older divorces were also on the rise. 92% of those that were getting married over the age of 65 had already been married once before, either being widows/widowers or divorcees.

Even so, people are waiting until their thirties to get married for the first time. During that time, even before their first go around, brides and grooms may have already accumulated enough assets to call for a prenuptial agreement to safeguard their possessions. Sarah Balfour, a partner at Irwin Mitchell who spoke at the Later Life Planning Conference in London last month, says she had seen a considerable increase in the demand for prenuptial and occasionally for postnuptial agreements to assign assets after marriage. “One of the largest areas concerns second- or third-generation wealth. Grandparents ask their grandchildren to enter into a pre-nup." In the United Kingdom, prenuptial agreements do not carry statutory weight so it is questionable whether they would survive a divorce.

The Supreme Court in the UK said in a landmark case in 2010 that if the evidence was strong, prenuptial agreements could have decisive or compelling weight. Lawyers and legal scholars perceive the case as test of whether certain prenuptial agreements will stand up in court in England and Wales. But to have any true weight, they must be fair to all parties involved.

See Lindsay Cook, Has Granny Signed a Pre-Nup?, Financial Times, May 15, 2019.

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

Article on Alpha Duties: The Search for Excess Returns and Appropriate Fiduciary Duties

Ian Ayres and Edward Fox recently published an Article entitled, Alpha Duties: The Search for Excess Returns and Appropriate Fiduciary Duties, 97 Tex. L. Rev. 448 (2019). Provided below is an abstract of the Article. 

Modern finance theory and investment practice have shifted toward "passive investing." The current consensus is that most savers should invest in mutual funds or ETFs that are (i) well-diversified, (ii) low-cost, and (iii) expose their portfolios to age-appropriate stock market risk. The law governing trustees, investment advisers, broker-dealers, 401(k) plan managers, and other investment fiduciaries has evolved to push them gently toward this consensus. But these laws still provide broad scope for fiduciaries to recommend that clients invest instead in specific assets that they believe will produce "alpha" by outperforming the market. Seeking alpha comes at a cost, however, in giving up some of the benefits of the well-diversified, low-cost, appropriate-risk baseline. Too little attention has been given in fiduciary law to this tradeoff and, thus, to when seeking alpha is prudent and beneficial for savers, and when it is not.

This Article begins to fill that gap by making two contributions. First, we provide the first benchmark estimates of how much alpha is required before ordinary investors would be better off departing from the consensus. For example, we estimate that a person of average risk aversion would annually need to beat the market by (i.e., obtain alpha of) between 6% and 15% before being willing to entirely forego the benefits of diversification and hold an individual stock (and that during a financial crisis such a person would need an annual alpha between 9% and 18%). Second, we consider the implications of our results for the various branches of law governing investment fiduciaries. We propose generally that fiduciaries should prudently weigh these alpha tradeoffs, and then should explain them to their clients before recommending (or executing) investments that deviate from the low-cost, well-diversified, age-appropriate exposure standard. We argue that through new technology, this kind of information can be given to retirement savers and others at quite low cost. Our results also have a variety of more specific applications. For example, our work shows that the value of diversification increases during periods of market upheaval, and therefore the duty of trustees to diversify personal trusts and employee retirement plans should likewise strengthen during such periods.

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

What Should I Do With My Inheritance?

The coming $30 trillion wealth transfer from baby boomers to the next generation has been presented in many pieces, and has a number of people thinking about their potential inheritance. As a prudent planner, an individual should have already planned for certain aspects of their retirement without the expectation of an inheritance. But how can you adjust your plan if you are almost positive that you will be getting a good to decent sized inheritance?

There are certain variables that make it difficult to account for an inheritance, such as families being against talking about it, investments may change, and people are living longer than before. The morbid truth is that with people living longer they tend to use up what would be the next generation's inheritance on living costs and long term care for themselves. Have an in-depth conversation with grandparents about possibly helping out now with the youngest generation - the grandkids - rather than waiting to pass on their estate in bulk on their deathbed.

See Ben Carlson, What Should I Do With My Inheritance?, A Wealth of Common Sense, May 14, 2019.

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

Even the Best Laid Plans Can Go Awry: The “Breakdown” of Tom Petty’s Estate Plan

Tom Petty’s unexpected death on October 2, 2017 dismayed his fans worldwide. Whenever a celebrity passes away, especially when it is sudden, the news sadly can be followed up with the story of how they failed to plan for their death, such as was the case with Prince and Aretha Franklin. But Tom Petty had a complete estate plan laid out, including a 77-page revocable trust document that he diligently amended throughout his life.

In the trust agreement, Tom named his second wife, Dana York Petty, to serve as the successor trustee after his death. One of her responsibilities was to create an LLC to hold Petty's music catalog. Though Dana is to have broad discretion such as how the limited liability company makes decisions, Petty's two daughters from his previous marriage are entitled to “participate equally” in the management of the limited liability company. The wording has unfortunately created tensions between the daughters and their stepmother.

The daughters have taken the position that, as the holders of the majority vote of the company, they have the power to control the company, including Petty’s artistic property. Dana, on the other hand, has taken the position that Petty intended for the parties to unanimously consent to actions taken by the company. Litigation has ensued between the parties.

Though Tom Petty appeared to put together a well executed estate plan and trust document, a prudent estate planning attorney may have advised him to appoint an independent trustee to serve as the successor trustee following his death and to require a professional manager to operate the limited liability company. The objectiveness of the independent trustee can foster confidence and cooperation between the trustee and the beneficiaries.

See Mary Rennie Rowe “M.R.” Litman, Even the Best Laid Plans Can Go Awry: The “Breakdown” of Tom Petty’s Estate Plan, WilliamsMullen.com, May 7, 2019.

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